[House Hearing, 109 Congress]
[From the U.S. Government Printing Office]
SIFTING THROUGH KATRINA'S LEGAL DEBRIS: CONTRACTING IN THE EYE OF THE
STORM
=======================================================================
HEARING
before the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
MAY 4, 2006
__________
Serial No. 109-160
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
------ ------
David Marin, Staff Director
Lawrence Halloran, Deputy Staff Director
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
C O N T E N T S
----------
Page
Hearing held on May 4, 2006...................................... 1
Statement of:
Perkins, Randall, president AshBritt, Inc.; George Schnug,
CEO, AmeriCold Logistics, Inc.; Neal Fox, member, Board of
Advisors, FedBid, Inc.; and James Necaise, vice president,
Necaise Brothers Construction, accompanied by David
Machado, staff engineer.................................... 135
Fox, Neal................................................ 201
Machado, David............................................... 216
Perkins, Randall......................................... 135
Schnug, George........................................... 196
Riley, Major General Don, Director of Civil Works, U.S. Army
Corps of Engineers; William Woods, Director, Acquisition
and Sourcing Management, U.S. Government Accountability
Office; Matt Jadacki, Special Inspector General, Gulf Coast
Hurricane Recovery, U.S. Department of Homeland Security;
Emily Murphy, Chief Acquisition Office, U.S. General
Services Administration; Elaine Duke, Chief Procurement
Officer, U.S. Department of Homeland Security; and Deidre
Lee, Deputy Director of Operations, Federal Emergency
Management Agency, U.S. Department of Homeland Security.... 30
Duke, Elaine............................................. 36
Jadacki, Matt............................................ 78
Murphy, Emily............................................ 50
Riley, Major General Don................................. 30
Woods, William........................................... 61
Letters, statements, etc., submitted for the record by:
Clay, Hon. Wm. Lacy, a Representative in Congress from the
State of Missouri, prepared statement of................... 116
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 110
Davis, Chairman Tom, a Representative in Congress from the
State of Virginia, prepared statement of................... 4
Dent, Hon. Charles W., a Representative in Congress from the
State of Pennsylvania, prepared statement of............... 254
Duke, Elaine, Chief Procurement Officer, U.S. Department of
Homeland Security, prepared statement of................... 38
Fox, Neal, member, Board of Advisors, FedBid, Inc., prepared
statement of............................................... 203
Jadacki, Matt, Special Inspector General, Gulf Coast
Hurricane Recovery, U.S. Department of Homeland Security,
prepared statement of...................................... 80
Kucinich, Hon. Dennis J., a Representative in Congress from
the State of Ohio, prepared statement of................... 250
Machado, David, staff engineer, prepared statement of........ 219
Maloney, Hon. Carolyn B., a Representative in Congress from
the State of New York, prepared statement of............... 101
Murphy, Emily, Chief Acquisition Office, U.S. General
Services Administration, prepared statement of............. 52
Perkins, Randall, president AshBritt, Inc., prepared
statement of............................................... 137
Riley, Major General Don, Director of Civil Works, U.S. Army
Corps of Engineers, prepared statement of.................. 32
Schnug, George, CEO, AmeriCold Logistics, Inc., prepared
statement of............................................... 198
Watson, Hon. Diane E., a Representative in Congress from the
State of California, prepared statement of................. 121
Waxman, Hon. Henry A., a Representative in Congress from the
State of California, prepared statement of................. 8
Woods, William, Director, Acquisition and Sourcing
Management, U.S. Government Accountability Office, prepared
statement of............................................... 63
SIFTING THROUGH KATRINA'S LEGAL DEBRIS: CONTRACTING IN THE EYE OF THE
STORM
----------
THURSDAY, MAY 4, 2006
House of Representatives,
Committee on Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 10:30 a.m., in
room 2154, Rayburn House Office Building, Hon. Tom Davis
(chairman of the committee) presiding.
Present: Representatives Tom Davis, Shays, Burton,
Gutknecht, Platts, Dent, Foxx, Waxman, Maloney, Cummings,
Kucinich, Clay, Watson, Lynch, Van Hollen, Sanchez, and Norton.
Also present: Representatives Pickering, Taylor, and
Melancon.
Staff present: Keith Ausbrook, chief counsel; Jennifer
Safavian, chief counsel for oversight and investigations;
Patrick Lyden, parliamentarian; Steve Castor, counsel; Chas
Phillips, policy counsel; Rob White, communications director;
Andrea LeBlanc, deputy communications director; Edward Kidd,
professional staff member; John Brosnan, procurement counsel;
Teresa Austin, chief clerk; Sarah D'Orsie, deputy clerk; Phil
Barnett, minority staff director/chief counsel; Kristin
Amerling, minority general counsel; Karen Lightfoot, minority
communications director/senior policy advisor; Michelle Ash,
minority chief legislative counsel; Jeff Baran, Margaret Daum,
and Michael McCarthy, minority counsels; David Rapallo,
minority chief investigative counsel; Earley Green, minority
chief clerk; and Jean Gosa, minority assistant clerk.
Chairman Tom Davis. Good morning and welcome to today's
hearing to examine the Federal Government's contracting
policies, practices, preparations and response to Hurricane
Katrina.
The purpose of this hearing is to examine the contracts in
place prior to Katrina's landfall and planning efforts that
took place in anticipation of this catastrophic event; the
rationale and processes for awarding disaster relief and
recovery contracts in the immediate aftermath; the internal
controls in place to ensure that Federal acquisition laws were
followed and that effective contracting practices were used;
and the terms and performances of Katrina relief contracts.
Most importantly, however, I want this committee to learn
the ways in which the management and oversight of disaster-
related contracting can be strengthened by heeding lessons
learned after Katrina. We do not want a reoccurrence of some of
the problems that ensued.
On August 25, 2005 Hurricane Katrina hit the Gulf Coast
States of Louisiana, Mississippi, and Alabama with Category 4
winds and torrential rains causing widespread flooding and
destruction. By September 9, 2005, Congress had provided over
$63 billion for disaster relief and is considering another $20
billion supplemental request.
The contracting community faced unique and challenging
circumstances. Acquisition personnel acted to meet pressing
humanitarian needs, contacting firms in an effort to provide
immediate relief to survivors and to protect life and property.
Many firms were called into action on a sole source basis under
acquisition flexibilities that allow the government to acquire
urgently needed goods and services in emergency situations.
Notwithstanding the extraordinary scope of the disaster, a
significant portion of the immediate response efforts were
provided through existing contracts that had previously been
awarded through full and open competition.
As we learned from our work on the House Select Katrina
Committee, the circumstances and urgent needs created by the
storm provided an unprecedented opportunity for fraud and
mismanagement. Nevertheless, despite the speed and scope of the
effort, the system, though stressed, seemed to work well.
Today we want to learn whether the proper procedures,
vehicles and mechanisms are in place to minimize systematic
vulnerabilities and meet the challenges posed by catastrophic
events.
The committee is interested in pre-disaster acquisition
planning by Federal agencies, the initial acquisition response
to the need for immediate relief, and efforts to respond to
more long-term recovery needs. The adequacy of the existing
acquisition work force to provide contract management and
support is going to be examined as well.
Finally, we will review lessons learned and suggestions for
improvements in our response to future disasters. Our review
will include the use of set-asides, including local contractor
participation, under the Stafford Act.
In addition, we want to understand the specific roles and
responsibilities of private companies as contractors to the
Federal Government. Our witnesses can bring their perspectives
regarding forward contracting, reverse auctions, the use of on-
line acquisition technology and the challenges that occurred in
implementing the Stafford Act in preferences for local
contractors. We will ask what assistance these firms provided
to agencies, the extent of previous support for agency missions
during natural disasters, and their participation in
preexisting disaster relief plans.
Finally, I am interested in the companies' perspectives
regarding the most effective contracting vehicles, methods and
policies.
Millions of dollars have gone to private firms to help
prepare for and respond to Katrina. Part of our job is to ask
what contracts should have been in place before this storm
arrived and the rationale and process for awarding disaster
relief and recovery contracts in the immediate aftermath. We
will ask about the ways in which the management and oversight
of disaster-related contracting can be strengthened.
Concerns have been raised with respect to how the Federal
Government awards contracts in the immediate aftermath of a
disaster. I hope that we can take the time to understand how
the procurement system works before we rush to change it. I am
sure we will learn that there have been mistakes when decisions
were made quickly. There will be disagreements with contractors
over pricing and payment schedules, which happens with complex
contracts under difficult situations.
We also need to look at and review the local participation.
Under the Stafford Act agencies and prime contractors are to
give preference to local subcontractors, but many small local
businesses continue to complain they are not hired or are hired
on unfair terms. Questions have been raised about the Corps of
Engineers' use of limited competition to award contracts for
debris removal and cleanup, for example.
At the same time larger firms argue that the projects are
too big or complicated for small firms to handle. Agencies cite
the need to hire firms with the track record, financial
strength and expertise to meet the requirements. They also note
the challenges posed by managing hundreds of smaller
contractors.
This raises a related but important issue. Clearly, we want
contractors to have the expertise to get the job done, but
before we can address that issue we need a sufficiently trained
acquisition work force. Our acquisition laws have been crafted
to provide enough flexibility for the government to quickly get
what it wants in emergency situations. I hope we will learn
what tools, if any, we will need to be better prepared next
time.
The officials on panel one will provide an overview of the
acquisition process and a description of the acquisitions made
before Katrina. The witnesses will undertake a review of the
agencies' performances in response to Katrina and their plans
for the future. The DHS IG and the GAO witnesses will provide
an overview of their Katrina-related investigations and
oversight efforts.
Panel two consists of representative companies whose work
can highlight particular contracting issues surrounding
response and recovery requirements. AshBritt is a national firm
providing debris removal services. AmeriCold Logistics
contracted to provide ice. FedBid provides reverse auction
services. And Necaise Brothers is a small local contractor.
Panel two witnesses are expected to provide an overview of the
goods and services they provided, a review of their contracts
with the Federal Government and the unique challenges they face
carrying out their missions.
I look forward to hearing from them.
I would now recognize our distinguished ranking member, Mr.
Waxman, for his opening statement.
Before I do that let me ask unanimous consent for Mr.
Pickering, Mr. Taylor and Mr. Melancon to participate in
today's hearing. Hearing no objection, so ordered.
Mr. Waxman.
[The prepared statement of Chairman Tom Davis follows:]
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Mr. Waxman. Mr. Chairman, I want to commend you for holding
this hearing and for your efforts in working on a bipartisan
basis to get documents from the agencies. This is a hearing
that we should be doing.
The picture the documents paint are not very pretty. It is
hard not to get angry. After Hurricane Katrina devastated the
Gulf States Americans did what they always do. They opened
their wallets to get the recovery going. As a Nation we
committed billions of dollars to make things better and
Americans asked us to make sure the job was done right. Today
we examine how that money has been spent, and what we will find
is massive fraud, waste and abuse, pervasive mismanagement and
gross incompetence.
Much of this is summarized in the briefing memo that my
staff prepared, and I would ask unanimous consent that it and
the documents it cited be made a part of the record.
Chairman Tom Davis. Without objection, it will be made part
of the record. Thank you.
[The prepared statement of Hon. Henry A. Waxman follows:]
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Mr. Waxman. One of the first and most basic challenges the
gulf faced was removing countless tons of debris. The U.S. Army
Corps of Engineers led this effort and awarded four contracts
totaling $2 billion to clean up the mess. The debris
contractors grabbed the money and then committed every abuse
imaginable. Some sought double payments for the same load.
Others massaged their travel record to qualify for bonuses for
long distance transport. And one contractor even picked up
debris from a public dump and drove it to the Federal site just
to game the system. The types of fraud and waste in the debris
contract goes on and on, and it is all summarized in depressing
detail in this memo.
Things were not any better in the effort to patch damaged
roofs. The Federal Government spent millions on contracts with
companies to install temporary blue plastic sheeting to protect
damaged homes. But internal government documents show that blue
roofs that were installed for billing purposes were never
installed on actual roofs. Overcharges were routine, and
exaggerating the amount of work actually done seems to have
been standard procedure.
The Katrina contracts are a lose-lose proposition. Private
contractors have exploited the system to make a bundle,
taxpayers were gouged, and the folks devastated by Katrina in
Louisiana, Alabama and Mississippi didn't get the help they
have deserved.
Who let this happen? Well, the short answer is the Corps of
Engineers, the prime contractors, the Bush administration and
Congress. The Corps had the actual responsibility of getting
the work done and looking out for taxpayers. But the Corps of
Engineers regularly failed to inspect trucks as they left dump
sites and repeatedly overestimated the size of the loads
delivered by the contractors. In a series of damning reports,
government auditors describe the Corps' assessment as unusually
high, overly generous, very liberal and consistently on the
high side.
The exact same types of problems plagued the blue roof
contracts. Government auditors found that Corps officials
entered into an informal agreement with the private
contractors, not to question bills as long as the bills did not
exceed the estimate by more than 50 percent. According to the
auditors, this agreement was, ``excessive and unreasonable and
does not adequately protect the government from waste or
abuse.''
One of the most powerful findings that emerges from the
documents is how fundamentally flawed the Bush administration's
entire contracting approach has been. The cornerstone of the
administration's approach has been to award large umbrella
contracts to major prime contractors. These contractors do not
collect the debris themselves and they do not patch the roofs
themselves. Instead they hire subcontractors to do the work and
then the subcontractors hire other subcontractors. The theory
behind this approach is that the prime contractors should have
the resources and the expertise to oversee these layers of
contractors effectively.
What the documents reveal is that this entire approach is
bankrupt. The government auditors repeatedly report that prime
contractors were exercising virtually no oversight over the
subcontractors. They do not know where the subcontractors are,
what they are doing or whether they have even completed their
work. This approach builds overhead on top of overhead and
dramatically inflates costs for taxpayers. Each contractor,
subcontractor and sub-subcontractor wants a cut even if it is
not doing any real work, and it is an ideal environment for
fraud.
When GAO testifies this morning we will also learn that
there was inadequate planning, that the agencies failed to
communicate with each other about who was in charge and that
there was ineffective contractor oversight because there were
not enough people on the ground. GAO will also tell us about
other examples in which millions of dollars were simply thrown
away because of incompetence and lax oversight.
What is clear is that contractor looting in Katrina is not
an isolated incident. Contract mismanagement, deficient
oversight and exorbitant overcharges have occurred again and
again since 2001.
The Bush administration has gone on three spending binges
in the last 5 years. The first one was the frenzied award of
huge homeland security contracts after the September 11th
attacks. The second was the $20 billion spent on Iraq
reconstruction, and the third is responding to Katrina. All
three are marked by unprecedented contractor abuse. We are not
talking about hundreds of thousands of dollars lost to fraud or
wasteful spending. We are not talking about millions. We are
talking about billions of dollars, billions squandered or
looted.
Scattered through Iraq right now are over 100 partially
built public health hospitals paid for by U.S. Taxpayers which
are likely never to be completed. They cost over $180 million.
The contractor Parsons got paid, but it did not finish its
work. Last month the New York Times reported on a $70 million
ditch Halliburton built in Iraq. It appears company officials
knew their plan for repairing an oil pipeline could not
possibly work. It didn't. But they still got $70 million and
American taxpayers bought a ditch.
Yet, despite the litany of extraordinary abuses, no one in
this administration seems to care and no senior officials are
ever held accountable.
Congress is no better. Given all the billions of taxpayers
dollars that have been wasted, Americans might think that
Congress would dig into this problem but in almost every case
with the exception of hearings in this committee Congress has
looked the other way. I am feeling particularly frustrated by
the Katrina looting because we knew it was going to happen.
That is why I joined with Minority Leader Pelosi last September
in introducing the Hurricane Katrina Accountability and Clean
Contracting Act. This legislation would have enacted
fundamental reforms in time to prevent the Katrina abuses, but
the bill never received a hearing.
Administration officials claim we are exaggerating the
problem, and the day after Leader Pelosi and I introduced our
Katrina legislation, the President said reforms were not
necessary and he promised, ``We'll make sure your money is
being spent wisely and we are going to make sure that the money
is being spent honestly.''
Well, I said at the outset we should all be ashamed and I
mean that, but at the same time I do want to thank Chairman
Davis for holding this hearing. He is one of the lone figures
on the Republican side who will ask questions and request
documents. He does not always go as far as I think he should,
but he does much more than many of his colleagues. In
particular, I want to thank him for requesting with us the
documents from the Army Corps of Engineers, the Department of
Homeland Security that detail the abuses in Katrina-related
contracts. These 3,000 pages of documents are the reason we are
here today, and I look forward to working with the chairman and
all the committee members in getting to the bottom of this and
finally holding someone accountable for the unconscionable
looting and incompetence. We owe that to the American taxpayers
and we owe it to all those who lost so much in Katrina.
Chairman Tom Davis. Thank you, Mr. Waxman. Members will
have 7 days to submit opening statements for the record.
We will recognize our first panel. We have Major General
Don Riley, the Director of Civil Works, the U.S. Army Corps of
Engineers. Welcome. We have Ms. Elaine Duke, the Chief
Procurement Officer at the U.S. Department of Homeland
Security. We have Deidre Lee, the Deputy Director of
Operations, Federal Emergency Management Agency, U.S.
Department of Homeland Security. No stranger to this committee.
Thank you for being here. Ms. Emily Murphy, the Chief
Acquisition Office, U.S. General Services Administration. Thank
you. We have Mr. William Woods, the Director of Acquisition and
Sourcing Management, U.S. Government Accountability Office.
Again, no stranger to this panel. And Mr. Matt Jadacki, who is
the Special Inspector General, Gulf Coast Hurricane Recovery,
U.S. Department of Homeland Security.
It is our policy to swear all witnesses in before you
testify. Please rise and raise your right hands.
[Witnesses sworn.]
Chairman Tom Davis. I think you have heard some of the
brickbats that have been thrown. I think all of you are capable
of defending yourselves if you feel it needs it. If you want to
depart from your written statement, you can say anything you
would like. We look forward to a rigorous oversight hearing.
General Riley, we will start with you. Thank you for being
with us.
STATEMENTS OF MAJOR GENERAL DON RILEY, DIRECTOR OF CIVIL WORKS,
U.S. ARMY CORPS OF ENGINEERS; WILLIAM WOODS, DIRECTOR,
ACQUISITION AND SOURCING MANAGEMENT, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE; MATT JADACKI, SPECIAL INSPECTOR GENERAL,
GULF COAST HURRICANE RECOVERY, U.S. DEPARTMENT OF HOMELAND
SECURITY; EMILY MURPHY, CHIEF ACQUISITION OFFICE, U.S. GENERAL
SERVICES ADMINISTRATION; ELAINE DUKE, CHIEF PROCUREMENT
OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY; AND DEIDRE LEE,
DEPUTY DIRECTOR OF OPERATIONS, FEDERAL EMERGENCY MANAGEMENT
AGENCY, U.S. DEPARTMENT OF HOMELAND SECURITY
STATEMENT OF MAJOR GENERAL DON RILEY
General Riley. Mr. Chairman, thank you. As Director of
Civil Works, I also command emergency operations for the Corps.
Thank you for the opportunity to testify today.
Under the National Response Plan the Corps is assigned as
the coordinator for Emergency Support Function No. 3, which is
public works and engineering. Under this function, the Corps
has an advanced contract initiative program in which we
competitively award contracts for future use in the provision
of water, ice, temporary power, temporary roofing, and debris
removal. Having these contracts in place allows the Corps to
rapidly respond to emergency situations.
Due to the unprecedented and widespread devastation in last
season's storms, the Corps awarded four additional debris
removal contracts in Mississippi and Louisiana that were open
to any company. We received 22 proposals and the contracts were
awarded on the basis of the best value to the government. The
Army audit award agency is currently reviewing the award and
administration of these four contracts.
FEMA also tasked the Corps to provide temporary roofs to
over 197,000 homes in Florida, Louisiana, Mississippi and
Texas. We previously awarded several advance contracts for
temporary roofs in the gulf region and given the magnitude of
the damage in the 2005 hurricane season, four additional
contracts were awarded under urgency procedures utilizing the
ranked proposals from the original competition.
Additionally, the Corps makes extensive use of standard
authorities granted to us under the various small business set-
aside programs, especially for Small Business Administration
registered 8(a) firms. We have instituted high goals for small
business subcontracting and included a reporting requirement
that keeps focus on achieving results in these areas.
Furthermore, we have been following an acquisition strategy
for our continued mission from FEMA, which includes
opportunities at the prime level for local disadvantaged
companies and geographic set-asides for the unrestricted
portion of the strategy. We work to strike a balance between
expeditiously providing relief to those in need while doing so
in the most efficient and effective manner. We immediately
deployed Corps internal auditors teamed with the Defense
Contract Audit Agency and the U.S. Army Criminal Investigation
Command to oversee all emergency response efforts, to note
actual or potential errors, help mission managers comply with
their fiscal stewardship responsibilities, and detect instances
of fraud, waste and abuse. We implement corrective actions
immediately.
Finally, for each emergency event we prepare after action
reports, which include lessons identified from all sources
during our response efforts. And our intent is to immediately
correct, strengthen and where necessary adjust supporting
procedures.
Again thank you for the opportunity to appear before this
committee, and I would be happy to answer any questions.
[The prepared statement of General Riley follows:]
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Chairman Tom Davis. Thank you very much. Ms. Duke, welcome.
STATEMENT OF ELAINE DUKE
Ms. Duke. Thank you. Mr. Chairman, Congressman Waxman and
members of the committee, thank you for the opportunity to
discuss the Department of Homeland Security acquisition program
and our role in providing support to FEMA and its response to
Hurricane Katrina.
I am a career executive and have spent most of my 23 years
of Federal service in the procurement profession. On January
31, 2006, I was selected as the Department's Chief Procurement
Officer.
Accompanying me today is Ms. Deidre Lee. Ms. Lee joined the
new FEMA leadership team in April. She brings a wealth of
acquisition experience that will greatly contribute to FEMA's
success in improving its disaster response and recovery
operations. She can answer any questions that the committee may
have concerning FEMA's plans on moving forward.
As the Chief Procurement Officer for the Department of
Homeland Security, I provide oversight and support to the eight
procurement offices within the Department. In addition to the
Federal Emergency Management Agency, the seven other
procurement officers are the U.S. Customs and Border
Protection, Transportation Security Administration, Immigration
and Customs Enforcement, the Federal Law Enforcement Training
Center, U.S. Coast Guard, U.S. Secret Service, and the Office
of Procurement Operations.
Collectively these eight procurement offices obligated over
$7 billion for supplies and services in support of the DHS
mission in fiscal year 2005. Because eight of the seven
contracting offices report to the heads of their components, I
strive to achieve functional excellence among the offices
primarily through collaboration. I use the DHS Chief
Acquisition Officers Council, comprised of the head of each
contracting office, to integrate the contracting function while
maintaining the components' ability to meet the customers'
unique needs.
My top three goals for the DHS acquisition program are,
first, to establish an acquisition system whereby each
requirement has a well-defined mission and a management team
that includes professionals with the skills to achieve the
correct mission results.
My second goal is to build a DHS acquisition work force.
One initiative under this goal is improving and broadening the
DHS fellows program. Under the fellows program we recruit
recent college graduates to ensure DHS has a qualified cadre of
acquisition professionals to support its mission now and in the
future.
My third goal is to assure more effective buying across the
eight contracting offices for the use of strategic sourcing and
supplier management.
On a Federal level as a member of the Federal Chief
Acquisition Officers Council, I will continue co-leading Ms.
Emily Murphy, my colleague at General Services Administration,
the Federalwide effort of developing a contingency contracting
program so that the procurement community has the tools to
provide an integrated Federal response to an incident of
national significance.
Our response to Hurricane Katrina revealed the need for
improvements in how we respond to such devastating events. For
the acquisition community we recognize the need for increased
staffing and we are hiring additional personnel. We also
recognize the need for additional longer term contracts to
improve FEMA's ability to respond to emergencies.
I will continue to work closely with FEMA's senior
leadership to ensure it successfully obtains the resources
authorized to build their acquisition core and to fulfill the
commitment to recompete contracts as appropriate. We are
addressing that area with the award of many disaster-related
contracts, including the competitive award of the planned
individual assistance, technical assistance contracts. We have
developed an overall contingency contracting strategy that
provides immediate response to disasters while taking full
advantage of the Stafford Act's preference for local
contractors.
I thank the committee for your aid in this effort, and I am
happy to answer any questions you may have and look forward to
working with you in the future.
[The prepared statement of Ms. Duke follows:]
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Chairman Tom Davis. Thank you. Ms. Murphy, thanks for being
with us.
STATEMENT OF EMILY MURPHY
Ms. Murphy. Good morning, Chairman Davis, Ranking Member
Waxman, and other distinguished members of the committee. Thank
you for inviting me here this morning to testify on GSA's
actions in the aftermath of Hurricane Katrina and how we serve
the taxpayers' interests in the procurement process in times of
urgent need. These are timely topics as we are roughly 1 month
away from the beginning of the next hurricane season.
In the past 8 months the men and women of GSA have worked
diligently to help respond to the call for assistance and even
now we are working to be more proactive. We must apply the
lessons from Katrina to every disaster that strikes in the
future. Immediately after Katrina GSA activated our contingency
contracting plan, supplementing with contracting officers from
all 11 regions and GSA's headquarters, 7 days a week, 24 hours
a day. Every member of my staff that we could warrant, we
warranted immediately to provide additional assistance to those
in the field. In our Office of Commercial Acquisition alone,
GSA associates worked nearly 9,500 collective hours on over
1,100 requisitions for items such as diapers, bottled water,
portable restroom facilities, computers, pumps, generators and
tents. Additionally we transferred nearly $2 million worth of
property from excess inventory to State and local governments,
including $332,000 in Federal property donated to the Furniture
for Schools Program in the affected areas.
Of the total 203 GSA managed office space locations within
the FEMA declared disaster area, 14 buildings were closed due
to sustained damage. That includes 189 lease locations and 14
GSA-owned locations, comprising in excess of 3.4 million
rentable square feet of lease space and 1.8 million square feet
of owned space.
On October 10, 2005 just 40 days after Katrina's landfall
on the gulf coast the entire Federal work force affected by
Katrina was returned to full operational status with
replacements and temporary space.
In response to fleet operational requirements GSA assigned
over 700 vehicles including vans, pickup trucks and buses for
immediate need, team short term basis to Federal agencies in
support of their aid and relief work in the affected storm
area.
As of April 18, 2006, GSA had procured over $630 million in
products and services in support of Hurricane Katrina. We made
every effort to comply with the Stafford Act and $483 million,
or 77 percent, of those procurements were awarded to small
businesses, with 53 percent to local small businesses. This
work occurred amid pressure to execute contracts quickly,
challenging working conditions and widespread logistical and
communications disruptions.
One example: On September 1, GSA was asked to quickly
establish a 500-operator call center in Chicago. At the time
FEMA was unable to meet the demand of the approximately 50,000
calls a day. As you will recall, this unprecedented urgent need
received national media attention and the President promised to
do whatever was necessary to ensure that people got answers. By
September 2 GSA leasing specialists had signed a letter of
intent for 60,000 square feet allowing for $405,000 of
electrical work and $280,000 of cabling work to begin. Within 1
week we had the center up and operational and ready for
contractors to go in and begin work.
Nothing is to suggest that everything went perfectly in
Katrina and we are working right now to ensure that we are
better prepared in the future. That includes stressing training
so that we give acquisition professionals the tools that they
need to be successful as they respond to disasters, a
partnership with the Federal Acquisition Institute and the
Defense Acquisition University to make sure that additional
courses are available on a real-time basis, and making sure
that go kits, including things like satellite phones and just
basic supplies, are available to our acquisition professionals
as we deploy them to the field.
As Elaine mentioned, we are co-chairing the CAO Council's
Working Group on Incidents of National Emergency, and we have
also gone back through the OMB response plan, gone and reviewed
all of our significant acquisitions that we did in response to
Hurricane Katrina to make sure that we bid not just the
appropriate contracts at the time of the initial acquisition,
but that continued to be the appropriate response going
forward.
In sum, we take seriously the trust placed in us by our
Federal customers and by the taxpayers. We have learned lessons
from Katrina and we will continue to apply those in the future.
And we very much look forward to working with this committee,
OMB and the other agencies to continue to support their
missions.
Thank you.
[The prepared statement of Ms. Murphy follows:]
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Chairman Tom Davis. Thank you.
Mr. Woods.
STATEMENT OF WILLIAM WOODS
Mr. Woods. Thank you, Mr. Chairman, Ranking Member Waxman,
other members of the committee. I appreciate the opportunity to
be here today to talk about the work of the Government
Accountability Office and looking at the Katrina-related
contracts.
Let me first mention the approach that we took and make a
couple of points there. We coordinated very closely as we began
to look at Katrina-related contracts with the rest of the
oversight community, particularly the inspectors general, Mr.
Skinner at the Department of Homeland Security, Mr. Jadacki and
the rest of their colleagues, to make sure that we could avoid
duplication of effort whenever possible. Those consultations
resulted in a couple of understandings among our representative
organization. First, it was very clear that the inspector
general community was devoting a significant amount of
resources looking at the award of these contracts, the
competition, the pricing issues, that sort of thing. And where
we felt that we could make the greatest contribution at the
Government Accountability Office is looking at the execution of
those contracts. So we decided to devote a significant effort
looking at the monitoring or surveillance of contractor
efforts.
The other accommodation that we were able to reach is that
we satisfied ourselves that certain contracts had quite
adequate oversight by the inspector general community,
particularly the debris removal contracts. So we decided that
we did not need to devote any additional resources looking at
the debris removal contracts.
I want to summarize very briefly our findings in looking at
these contracts, but before I do I want to recognize the hard
work and extraordinary effort of all of the responders at the
Federal, State and local level and the contractors who devoted
a significant amount of effort in responding. We can all have
our differences about the outcomes and we will have our debates
about the challenges that they face, but there can be no
disagreement, it seems to me, about the effort that was put in.
Many of these people were volunteers from agencies that are
represented at the table and a number of other agencies, and I
wanted to recognize that effort.
Let me summarize very briefly our findings. We found
shortcomings in three primary areas: First was planning, second
communications, and third was work force. And in each of these
areas I will summarize very briefly the challenges that the
agencies faced but then also talk about some of the experiences
that we learned about from other organizations, private sector
organizations, other companies, State and local governments
that also responded to challenges and maybe there are some
lessons learned for the Federal Government in these areas.
First in the area of planning, we found insufficient
numbers of pre-awarded contracts. Some agencies had pre-awarded
contracts. The Federal Emergency Management Agency had some but
clearly not enough. They did not adequately anticipate the
needs for temporary housing, for example, or the need for
public buildings.
By contrast, the Corps of Engineers, you heard earlier
about their Advanced Contracting Initiative that enabled them
to have the contract, the preawarded contract, in place in
order to be able to respond.
Similarly, we found that in the State of Florida, they have
a very comprehensive data base of the amount of supplies and
services that are going to be needed. They prequalify their
vendors so that they are able to very, very quickly enter into
whatever contracts are needed after the onset of the event.
In the area of communication and responsibilities, we found
a couple of instances where it was very clear that agencies--
one agency did not have a good understanding of what another
agency was doing. Let me give you one specific example. In the
area of ice, the Corps of Engineers was responsible for the
contracts for ice. FEMA placed the requirements for ice, but
FEMA did not understand how the Corps of Engineers went about
contracting for ice, and, as a result, ordered twice as much
ice as was needed. This resulted in a very difficult situation
when the ice arrived to the region and there were insufficient
distribution and storage facilities in order to be able to
handle the quantities that arrived.
By contrast, when we looked at other organizations, for
example, CSX Transportation, one of the approaches that they
take is they conduct joint training exercises with all
organizations that are going to be responsible for responding,
including the contractors. And that enables them to anticipate
some of the difficulties that might arise after the event
occurs.
And then, third, in the area of work force, we found that
there were insufficient numbers of contract monitors,
specifically in the blue roof program and also in the temporary
housing area for the trailers. The lack of onsite contract
monitors delayed both of those programs.
Again, by contrast, when we looked at some other
organization, Land Star Transportation and Wal-Mart, for
example, they place a premium on being able to redeploy
employees in a very, very fast turnaround response time to be
able to respond to the needs of their customers.
With that summary, I will be happy to take whatever
questions the committee may have.
Chairman Tom Davis. Thank you.
[The prepared statement of Mr. Woods follows:]
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Chairman Tom Davis. Mr. Jadacki.
STATEMENT OF MATT JADACKI
Mr. Jadacki. Good morning, Mr. Chairman, members of the
committee, and guests. Many of the comments that I am going to
make, my opening statement kind of echoes what my colleague
here, Bill Woods, said regarding some of the cooperation and
coordination findings. So I will try to be brief.
In the aftermath of a major disaster such Hurricane
Katrina, the Federal Government is obligated to ensure a number
of important safety and security measures for its citizens. The
government is responsible, among other things, to take
immediate steps to mitigate damage or harm to its citizens;
ensure that roads are clear of debris, to allow emergency
workers access to affected areas; provide temporary shelters
for disaster victims; and provide minimum repair to buildings
to enable victims to return to their homes, to prevent further
damage.
As we review the Federal Government's response to Hurricane
Katrina, we asked the question: Did the Federal Government meet
its obligations? Unfortunately, as my testimony indicates and
our findings of some of our reviews, there are still many
weaknesses in the Federal Government's response and recovery
efforts. We are still in the process of fully evaluating the
overall contracting efforts in predisaster planning related to
Katrina. Again, we are working closely with the Government
Accountability Office and with the other Federal Inspector
General's Office.
To date, my office has published over 40 reports, many of
these dealing with contracting issues. Many of these reports
pertain to FEMA's procurement activity, including contracts for
technical assistance, cruise ships, mobile homes, base camps,
guard services, to name a few.
We are also undertaking several major reviews of FEMA
contracts and we plan to vigorously review contracts led by
FEMA and other DHS components regarding disaster-related
activities.
FEMA's core mission is to respond to emergencies and
procure emergency supplies and equipment. For example, ice,
food, water, travel-trailer mobile homes base camps on a
recurring basis. Therefore, planning for these procurements
would represent sound business practice. Because of the
unpredictable nature of emergency operations, such planning
cannot always be used to select specific sources in advance.
However, for each type of procurement such as ice, water, food,
predisaster planning can identify prospective sources of
supplies and services, delineate how competition will be
sought, promoted, and sustained during emergency operation,
describe how Stafford Act requirements for preferences of firms
affected by the disasters will be met; lay out source-selection
procedures for each type of procurement; and establish
communication systems and processes and publicize them in order
to have prospective sources know how to contact FEMA
procurement personnel.
Because this disaster planning did not take place, FEMA,
and many other components of the Federal Government, found
itself hastily entering into contracts, with little
competition, for disaster commodities. Understandably, in the
aftermath of a disaster, government agencies award contracts
under expedited contracting methods, as authorized by the
Federal Acquisition Regulation in order to quickly respond to
victims' needs. DHS alone ordered 3,400 contracts worth $5.3
billion in the immediate aftermath of Hurricane Katrina. We
understand that the immediate response is needed to provide
victims essential aid; however, we suggest that many of these
response requirements are the same for every disaster.
A degree of predisaster planning can and should take place.
Predisaster planning should include establishing standby or
call contracts with vendors to provide essential goods and
services required to facilitate immediate response operations
or to meet the needs of disaster victims.
For example, call contracts, ice, water, food, tarps,
transportation, travel-trailers, and other items commonly
procured shortly after disaster strikes should be in place and
ready in short notice. A call contract allows for cost
specifications, terms, and conditions to be negotiated in
advance, negating the need for intensive contract negotiations
during a crisis. This is a common business practice in the
private sector and in other Federal agencies.
I submit to you why we are here today: to learn lessons
learned in the past--in this case the Federal Government's
response to devastation caused by Hurricane Katrina--in order
to not repeat the same mistakes.
Because of the nature of disaster operations, we understand
that predisaster planning has to be flexible. However,
predisaster planning should balance the Federal Government's
capabilities with those of the private industry, including
distributors, wholesalers, retailers, manufacturers, and
service providers. We suggest use of caller standby contracts
with prenegotiated prices, quantities, terms and conditions,
and specifications to facilitate procurement operations in the
immediate aftermath of a disaster.
We understand that FEMA is aggressively pursuing and
recruiting contracting officers and COTRs to augment its
contract staff. In addition, it established a separate contract
office to handle the procurement activity for the gulf region.
These are important first steps to provide additional oversight
controls and support for recovery operations throughout the
gulf region.
More importantly, it positions FEMA to better meet the
procurement demands of the future.
Our hope is that the lessons learned from our findings will
help address these weaknesses and not allow us to repeat
historical mistakes but, rather, take these lessons learned and
turn them into solutions solved.
Mr. Chairman this concludes my prepared remarks. I would be
happy to answer any questions.
[The prepared statement of Mr. Jadacki follows:]
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Chairman Tom Davis. I thank all of you very much.
Let me start the questions, Mr. Woods. Let me start with
you. We have heard Mr. Waxman's assessment, and I didn't ask
him for a grade, but I don't think it is a passing grade in
terms of how this worked out.
We know the administration said, basically, mistakes were
made. But they have been very defensive about what happened.
What is your overall assessment of the performance of the
acquisition agencies and the contractors, and how would you
grade the performance of our acquisition system in response?
And I am going to ask you the same thing, Mr. Jadacki. Let
me ask you. You have been through this before. You have seen it
is an emergency, you discount a little bit for that, but how
would you grade it?
Mr. Woods. Well, I think you can't underestimate it and
fail to give full appreciation to the circumstances. Clearly,
the agencies did the best that they could under the
circumstances. But those circumstances just greatly overwhelmed
the planning that was in place, the work force that was
dedicated to the effort and to the systems.
Chairman Tom Davis. Let me ask you--you are GAO, so you
don't have to answer to anybody but Congress, and we rely on
you to call the balls and strikes here.
This storm was not only predicted, it was predictable. I
mean, everyone knew sooner or later you could get a storm of
this magnitude. You started off with three deficiencies in your
report. And the first one was planning.
Now, everybody here tried to do the best they could. I
don't think Mr. Waxman or myself are going to question anybody
there on the ground. But at the end of the day, how would you
rate the planning for this?
Mr. Woods. The planning was not where it needed to be for
the level of the storm that hit, clearly.
Chairman Tom Davis. Anywhere close?
Mr. Woods. I don't believe so. They were overwhelmed by
what actually occurred.
Chairman Tom Davis. And, in fact, we had gone through an
exercise, Hurricane Pam, just a few months before, that
predicted a storm of large magnitude as this in the New Orleans
area, didn't hit the Mississippi coast. So in the planning,
could you give them a passing grade?
Mr. Woods. That's correct. There were lessons learned from
that exercise Pam, but, clearly, the results of that learning
were not translated into adequate planning for Katrina.
Chairman Tom Davis. So on the planning side, is it fair to
say we get an F on that? It was not anywhere near where it
needed to be.
Mr. Woods. I am not sure I would want to give them a grade,
but it is clearly not where it needed to be, sir.
Chairman Tom Davis. You can't give them an incomplete. I
mean, in this case it came.
Mr. Woods. We can certainly go that far, to give them an
incomplete.
Chairman Tom Davis. On communications, the other--let me
ask you, Mr. Jadacki, taking a look at the planning and
everything else on this, planning wasn't anywhere near where it
needed to be for a storm of this magnitude, and yet for years
this has been predicted and we drilled on this, and this was a
worst fear.
What do you have to say about that?
Mr. Jadacki. I mentioned in my opening remarks the
predisaster planning had to be there. I had an opportunity--I
did have the opportunity when I was working for FEMA to attend
the Hurricane Pam exercise. And, quite frankly, I was kind of
shocked at some of the scenarios that were being predicted a
year before the disaster, and actually watched the events
unfold on TV. It was eerie. But, again, they were predicting
during that exercise that hundreds of thousands of people would
be displaced from their homes, that the levees would break, the
waters would rise. So it is not a surprise on anybody's part
about the predisaster planning.
I know that FEMA, for a number of years, had discussed the
notion of a catastrophic housing program; what to do when a
number of people were displaced in those homes and had to be
moved.
Normal disasters, if there is a normal disaster, people
would evacuate 50 miles inland, the disaster would be over, and
they would eventually go back.
In this case, people were evacuating to almost every single
State and some territories, staying in hotels, staying in
travel-trailers and apartments and those types of things. That
type of planning would really help to go a long way.
Chairman Tom Davis. So the planning here was nowhere near
where it needed to be?
Mr. Jadacki. No.
Chairman Tom Davis. And everything else flows off that,
because once you don't have the planning in place and the
assets prepositioned and it is in your face, you do the best
you can at that point. But more mistakes are likely to ensue
under that circumstance than if you had those things in place.
Mr. Jadacki. I agree. I think we were overwhelmed. The fact
we had hundreds of thousands of citizens that had to leave
their homes for extended periods. What to do in that case? It
didn't include procurement.
Chairman Tom Davis. Let me just go to the panel and ask on
the other side, now we have a new hurricane season coming up.
What is different this year than last year? How are we assured
that if this happens--you still drive through and there is
still debris on the ground months afterwards.
In fact, the thing that caught me the most on my third
visit down there was how much debris is still on the ground,
although I recognize that there was a lot of debris to start
with, and you have to put it somewhere. We will get to that in
this panel and the next panel.
What is different this year on the planning that makes us--
should make everybody feel safer?
I will start with General Riley.
General Riley. Sir, if I may, in particular in the planning
for the Advanced Contract Initiative, once again we will have
in place advanced contracts for procurement of ice and water;
also construction of temporary roofs and removal of debris.
In addition to that, we have our contracting community; we
are strengthening our procedures for hiring of local
contractors.
Chairman Tom Davis. Can I make--I hear you. But, you know,
Home Depot or Wal-Mart, any of these groups, could have gotten
assets there a lot quicker if you had just given it to them,
than some of these other companies. They have a supply train
and a way to get things moved around. They have--in some cases
they are closer to the points where these things hit than some
of these governments sites that are prepositioned there.
I had the president of Home Depot say they wanted to give
stuff away at cost. We didn't have a mechanism to accept that.
We didn't have a mechanism to accept millions of dollars
donated to us from around the world.
Do we have that in place this year?
General Riley. Sir, as far as the delivery----
Chairman Tom Davis. It is not just to you; I am going to
ask Ms. Duke, and Ms. Murphy; and, Dee, if you want to climb
in, you are new to this on this side this year.
General Riley. As far as the delivery of commodities, in
particular you mentioned ice and water and logistics that the
Corps procures. We have those contractors in place and they are
ready. They have many of them already, of course, a great deal
stored for this year, and we had some stored for last year as
well that we used in the initial days.
So those types of things I think is an initial good
preparation for this season for the procurement of commodities.
For debris removal in the case of our advanced contract,
last year we saw the storm was coming into Louisiana and
Mississippi, so I spoke to the contractor the day prior, on
Sunday--Saturday, excuse me--2 days prior to landfall. He had
his equipment and personnel staged in Florida and in Texas,
ready to move into the storm from both sides.
So those are the kinds of things we had in days before. And
then long-term preparation, we have many actions going on to
prepare ourselves better for this season.
Chairman Tom Davis. But, again, the last time--for example,
shelters. We were very inadequate on the shelters for Katrina.
Thank goodness that the Convention Center didn't get
flooded; that it was--it happened to be on higher ground. That
was almost--I mean we were lucky in that case. That wasn't
something that was picked because it was predicted. It was set
for 1,000 people and 30,000 people showed up, and the next day
another 30,000 people showed up, and they ended up in the
Convention Center instead of the stadium.
I think we just didn't imagine something that--the planners
never imagined something of that magnitude hitting; is that
fair to say?
General Riley. Sir, I guess I would characterize it--
certainly in the Hurricane Pam exercise you noted, that
planning did go through, that type of thought process. What was
actually in place was similar to hurricanes that happened in
the previous season in Florida. So that type of magnitude,
clearly the magnitude of this one clearly overwhelmed the
people and the property and the emergency response force.
Chairman Tom Davis. I guess what I would just--one of my
counsels is sitting back here, and, having gone through all the
hearings is that for all the planning, for all of the contracts
that you have in advance, you always need a plan B just in case
it becomes something else. And in this case, it wasn't a plan
B.
It was kind of, you know, we kind of invented it as we went
along, and the result of that was not just additional cost to
taxpayers but loss of life and property.
Let me just ask some of the other agency heads how you view
that same question. How are we ready for this next year?
Ms. Duke. I will start and then, Mr. Chairman, if Dee wants
to add any additional specifics. I will begin for DHS.
Chairman Tom Davis. Let me say, Ms. Duke and Ms. Murphy,
that a lot of the planning on this is above your pay grade when
it comes to planning and prepositions. You are procurement
officers. But some of the planning over this stuff is really
not your job, so I'm not trying to single you out. But it was
very inadequate in this case and I wanted you to give any
assurance for next season that it gets better and that there is
a plan.
Ms. Duke. Yes, Mr. Chairman. We are working in two general
areas in planning. One is the people side, and one is the
contract side. When the last hurricane season hit, FEMA had in
place less than a dozen contingency contracts to be prepared
for the hurricane season. This year, with FEMA, there is over
70 contract actions that we are working to have in place and
prepared before the hurricane season.
These include some renewal, some additional new actions, so
we are expanding the number of contingency contracts we have in
place. So we are not reacting after a disaster hits.
On the people side, that is an area that I am, from the
Department, working with FEMA extensively on also. One of the
things we did is hire Ms. Lee.
As you mentioned, Mr. Chairman, procurement does not have
the total responsibility for delivering the mission activities.
It is a tool by which we deliver. One of the things Ms. Lee
brings is the acquisition and expertise.
Chairman Tom Davis. You don't have to convince the
committee about Ms. Lee's expertise. We are happy to see her
there.
Ms. Duke. The other thing that her position brings, and her
individually, is integration of the different functions of the
acquisition process in the FEMA. And we think that is going to
help a lot in the planning.
In terms of--we also have a director of the learning lab, a
new senior executive, Ms. Tina Burnett, who is a new senior
contracting person in FEMA that will lead the actions we have
taken.
Chairman Tom Davis. I gotcha.
Dee, let me ask you. You are new. You are sitting here in
the shop. You come over from GSA, and you were in DOD and were
head of Office of Procurement Policy under President Clinton,
and very highly regarded by both Mr. Waxman and myself. How do
you see it? Are we better off than last year?
Ms. Lee. Yes, sir. In my vast 4 weeks' experience, we are
doing the things Elaine talked about. One of the things that is
really working with the technical community to understand the
requirements, make sure we have the contracts ready to go and
meet those requirements. We are looking at, as you mentioned,
the learning lab.
The other thing we are looking at is real-time ability to
order as needed. And we are actually looking at piloting the
possibility of doing some on-line or reverse auction on the
site, on time, which of course would require what people
mentioned was free registration of the contractors, telling
contractors how we are going to do that.
So we are going to do a little bit of that, a lot of
contracts in place and also more long-term planning. We are
already looking for 2007 and putting in place contracts that we
think are needed.
Chairman Tom Davis. Thank you. Ms. Murphy do you want to
say something?
Ms. Murphy. One of the things we did was we went back and
adapted the Federal procurement systems so we can identify all
the procurements we made in conjunction with Katrina. We looked
at reviewing the kinds of contracts we did against the
contracts we already have in place, 18,000 contractors under
the multiple award schedule, trying to identify where those
contracts are so we place BPAs against them. So we have those
available, going forward, to meet the additional needs. We
worked with our global supply program to make sure we have the
contracting resources in place there, in case FEMA or anyone
else needs to access those.
And we have been working to make sure that those we deploy
in the field, that don't have Internet access, can't reach the
central contractor registration to find the 400,000 vendors the
government has already registered doing business with us, they
have a thumb drive, another way of accessing that.
Chairman Tom Davis. We didn't get into communications, but
it wasn't interoperability; just plain operability went down.
And there was no real contingency planning. We did find that
some of the key decisionmakers were getting their news from
CNN, not all of it accurate.
My time is up. Mr. Waxman.
Mr. Waxman. Thank you, very much, Mr. Chairman, and I want
to thank all the panelists for their testimony. If there is not
this advanced planning, then the government found itself, Mr.
Woods, scrambling to try to deal with the problems. Isn't that
the result of the inadequate planning?
Mr. Woods. I think that is a fair statement, sir.
Mr. Waxman. And so, as I understand it, they needed four
contracts to provide temporary housing. They had only one in
place, so they had to move quickly.
I want to focus on the debris, the debris area, because
after the hurricane struck, there was a lot of debris that had
to be removed, and there were no contingency contracts in place
for debris removal.
The government then rushed into four $500 million contracts
for debris removal. And the government's own evaluation of
these contracts disclosed a host of problems. Seems everywhere
the auditors looked, they found taxpayers were losing out.
Here is how the debris removal was supposed to work. Trucks
were supposed to pick up the debris and take it to dumps. When
the trucks arrived, officials from the Corps of Engineers were
supposed to make sure that they were full. Since contractors
are paid by the cubic yard, the more debris they collect, the
more they are paid. Then when trucks leave the dump, the Corps
is supposed to make sure they are empty so the government
doesn't end up paying twice for the same debris.
Now, that is supposed to be how it is supposed to work. But
I want to examine how it actually worked. I have an audit,
dated September 25th from Mississippi. It states, ``that
auditors observed a self-loading truck exiting the dumpsite
without completely unloading the debris from its truckbed.'' As
a result, the audit found the contractor was, ``fraudulently
being paid twice for the same load.'' In other words, drove off
with the truck, didn't unload at all, came back and then said,
well, I have more debris and so, in effect, they are being paid
twice.
This wasn't an isolated occurrence.
A month later, auditors observed four trucks leaving the
dumpsite in Laurel with a considerable amount of debris
remaining in the trucks.
General Riley, are you aware of these audit findings?
General Riley. Yes, sir; I am. And I thank you for bringing
that up. That is exactly why we deployed auditors. I arrived at
the Louisiana State Emergency Operations Center the day prior
to landfall. My experience from the previous year's storm was
those emergency operations are very vulnerable to fraud and
abuse. And so on the day following landfall, I issued an order
to deploy all of our auditors and also called for the Army's
Criminal Investigation Division. And then, within 3 days, they
were arriving.
Mr. Waxman. Let me go through some of these audits with you
because you are familiar with them. From the documents, if the
Corps is not really making sure that what is being done is done
right, and we are paying for what work was actually done,
contractors can see an opportunity for abuse. And there are
documents numbered 137, 156, 162, 213 and 16, and they say that
across the gulf region the Corps failed to inspect the trucks
as they left the dumpsites.
Let me read to you what one of those audits said about the
Corps' failure to inspect the trucks. ``This provides the
opportunity for truck drivers to leave debris in the bed of the
truck while receiving full credit for each load, resulting in
government overpayments to the contractors and minimizing the
amount of debris being cleared.''
General Riley, how would you react to this lack of
oversight?
General Riley. Well, what I would react to is that is
exactly what I told our auditors to go out and find. When they
arrived, I told them to find out what is going wrong. Don't
tell about me about what is going right, although they did and
did that very well.
But what I wanted to know was, I knew that this type of
situation--and we did have an advance contract in place, and
they worked and they moved in immediately, the day following
the storm, and began to work. We found that we then needed to
complete larger contracts, which we did, for Louisiana and
Mississippi because of the enormity of the storm.
So those inspection reports that you are referring to, sir,
were exactly what I was looking for. Those, then, were
coordinated with the contracting officer, the safety officer,
and then sent to the commanders on the ground to verify that
corrective action has been taken.
My intent for those auditors was to go out immediately and
find it, document it, and correct it where they could
immediately, and then get the commanders to do their work as
well.
Mr. Waxman. Mr. Woods, GAO examined contract oversight in
the gulf coast. What did you find? Did the Corps have
sufficient contract personnel on the ground to prevent abuses?
Mr. Woods. We found that they did not have enough personnel
in order to be able to adequately monitor contractor
performance.
Mr. Waxman. Unfortunately, leaving the dumpsites with
loaded trucks was by no means the only abuse. The documents
describe a host of other schemes to enrich the contractors and
gouge taxpayers.
They provide one subcontractor, or Halliburton, that
repeatedly picked up debris from wooded lots on private
property instead of public rights-of-way, as required by the
contract, and other contractors overstated their mileage to
earn an extra $2 per cubic yard because, I gather, if they
traveled further they got paid more. But they didn't really
travel further. Still others mixed different types of debris to
inflate their billings.
Another report I want to read to you is a Mississippi
report, dated October 11th, and according to the auditors,
``they watched the driver climb the citizen dump pile and enter
the excavator. He proceeded to load his trailer himself. When
the load was complete, the driver exited the dumpsite. He then
pulled around the entrance tower and unloaded his trailer with
the debris he obtained from the citizen dumpsite.''
In other words, this contractor picked up debris from a
public dump and then drove it into the Federal dump to game the
system and pump up its payments.
General Riley, were you aware of these kinds of abuses?
General Riley. Absolutely, sir. And, again, I think that
was why we had 3,000 audit reports. Those were our auditors
going out and finding that stuff. And what we did then is we
withheld payment from a contractor until we verify that it has
been properly accomplished. And then at the end of the
contract, before we close it out with our retainage of any
contract award, we will retain funding until we verify the work
has been accomplished.
Mr. Waxman. Were there criminal or civil enforcement
actions initiated?
General Riley. Yes, sir; there sure were.
Mr. Waxman. Can you tell us how many?
General Riley. I would prefer to defer that--but we have,
and there have been indictments, and that was my whole intent
for the day after the storm calling the COD down.
Mr. Waxman. Well, the auditors found that the Corps
routinely credited contractors with hauling more debris than
they actually carried. The auditor said that the assessment by
the Corps were, ``overly generous, unusually high, and
consistently on the high side.'' And so Corps officials would
just write down that the trucks were 100 percent full, even if
they weren't.
Mr. Jadacki you are the lead IG for the gulf coast recovery
effort. Do these Corps practices meet your standards?
Mr. Jadacki. No they don't. Traditionally--I have worked
for FEMA about 15 years in the Inspector General's office and
also the CFO's office--the debris removal contracts and debris
removal activity has been the most problematic, rife for fraud,
waste, and abuse. And the fact that we have seen in past
reviews we have done of sites with no monitors, blank tickets,
things like that, we try to keep a close eye on that.
In the case of the Corps of Engineers, we are relying on
the DOD Inspector General to keep an eye on those things.
However, FEMA also provides debris removal under the public
assistance program, too, where we rely on the local
jurisdictions to provide those types of things and provide the
assurances and oversight and that makes it problematic, too;
because we are not dealing with one or two entities, you are
dealing with a number of them. So we are aware of things that
have gone on in the past and we are establishing controls,
because they are needed in that program.
Mr. Waxman. I understand from General Riley he had
auditors, his auditors, out there to try to flag these
problems. They did flag the problems, according to what I
understand--he just told us--and that they were addressed
immediately.
But when audits like these keep appearing over and over,
for month after month after month, across different States,
different sites, and different contracts, it seems like one
could conclude that the officials who are in charge of the
contracts aren't doing their jobs. Did you find them taking
adequate action?
Mr. Jadacki. In the case of the debris removal, which we
are looking at, we found some cases where there were no
monitors and we took immediate action to get monitors into
place. The problem I was seeing in this disaster is that it is
spread out over--there are 63 million cubic yards of debris out
there, over a land size about that of Great Britain. So having
oversight of every single site at every single truck is
problematic.
I am not saying it shouldn't be done, but just given the
magnitude of the disaster, it is difficult and it spreads a lot
of resources thin.
Mr. Waxman. Mr. Woods, did you have any review of the work
the Corps did?
Mr. Woods. We did not look at the debris removal contracts
at all.
Mr. Waxman. I am trying to give General Riley an
opportunity. It sounds like you are saying all these things
were done properly and all the problems were caught and
addressed, and the public was protected from their taxpayer
dollars being wasted. Are you comfortable with a statement like
that?
General Riley. No, sir. I am not, because it wasn't all
done properly, and that is why I called an army of auditors and
training of quality assurance personnel down, because I knew
there would be challenges like that when such an enormous storm
spread out over much territory. But we do have procedures in
place then to go back and attempt to recoup the money from the
contractors. And we are doing that to this day.
Mr. Waxman. Of course, if the Army Corps took the
contractors' word and gave them credit for full load of debris,
when they didn't have a full load of debris, there is no way to
check that afterwards; they just got paid, and they are going
to continue to hold that.
General Riley. We will verify the load tickets and go back
and all that. Now, all the reports you are referring to there
are internal audit reports that is exactly what I wanted them
to find.
And what we did then is take--as new quality assurance
personnel continued and updated the training of those
personnel, ethics training every single day, training of our
quality assurance people, personnel, and then commanders on the
ground working to correct these problems, because over such a
long period of time, we had over 3,200 from the Corps. Ten
percent of the Corps of Engineers was deployed on this
hurricane. Half of those quality assurance personnel required
training.
Mr. Waxman. I see the red light and my time is up. But I am
pleased you are trying to go back and check these things. What
I am afraid of is, from your own audit reports, the debris
removal contracts have been a great deal for the contractors
but not a good deal for the taxpayers and the victims who are
still suffering in the gulf coast, and we are trying to catch
up with money that has just fallen right through the cracks.
And we are not talking about a small amount of money. We are
talking about a huge amount of money. So we hope you will stay
on it.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you, Mr. Waxman.
Mr. Shays.
Mr. Shays. Thank you, Mr. Chairman. I want to thank you
again for the hearings you conducted, the Katrina hearings. And
thanks to people like Mr. Taylor, who were there participating,
we learned that this was a storm of biblical proportions. And
one of the points that in my criticisms--and I have tremendous
criticisms--I mean, the committee had tremendous criticisms,
and we said basically the White House was in a fog, we said
Homeland Security was missing in action, we said FEMA was,
frankly, derelict. We said the Governor and the Mayor of New
Orleans simply were a part of the problem.
Having said that, people point out to me that we--the loss
of life, given the biblical proportions of the storm, was
relatively small. I mean, in Mr. Taylor's district, 10 miles
in, the water was 20 feet high. And I asked Gene Taylor to
describe to me why that was so. And he said in Mississippi they
have a culture of dealing with storms, and that the last great
storm, I think Mr. Taylor told me was when he was younger, but
his parents kept teaching him. And he passes it on to his kids
and so on.
So I want to acknowledge that we must have learned
something, but I think it was more the folks living down there
than the Federal Government.
Mr. Riley--excuse me, General. What I am to gather from the
dialog you have had continually with Mr. Waxman is a lot of the
criticisms, the abuses, were abuses that your own people
discovered, correct?
General Riley. Yes, sir. That's correct.
Mr. Shays. So this isn't a big surprise you were
discovering and trying to deal with it. So I gather from this
is when you are dealing with a storm of such huge proportions,
you were trying to just get out there and deal with it; and
oversight was important, and very important, but it simply was
second to just helping people as quickly as you could.
That is acceptable to me in the initial stages. Are some of
these criticisms, though, and findings happening now? Or did
they happen then, but are no longer happening now?
General Riley. Sir, my belief is that we have sufficient
procedures in place, all the towers, the landfills that are
constructed, quality assurance personnel.
Mr. Shays. Let me ask this question, though. The sightings
that Mr. Waxman was pointing out, which were serious, were
those reports that were done a year ago? Are they reports you
found a month ago? This was still happening?
General Riley. Sir, these were through the fall; October,
November primarily--September, October, November.
Mr. Shays. Of what year?
General Riley. Last year, during Katrina primarily.
Mr. Shays. You are still doing the cleanup; correct?
General Riley. Yes, sir.
Mr. Shays. Are you still uncovering this same kind of
corruption?
General Riley. Sir, we uncover it in places where we have a
new volunteer deployed to the storm that are quality assurance
personnel. We train them as they come in.
Mr. Shays. But it is happening, but it----
General Riley. Yes. Much less frequency, of course. And
then we go back and verify, and the commanders on the ground
assure us.
Mr. Shays. Ms. Lee, I know you are new to FEMA, but what
blows me away about FEMA was the continuous stories of how they
kept saying ``no'' to voluntary help, ``no'' to this effort,
``no'' to that effort. It was constant: No, no, no.
We had people willing to offer help and so on. But I have
two major industries in my district, folks who are basically
international suppliers of water. And they said when they
wanted to provide water into the region, they had to negotiate
with an individual who basically worked out of his kitchen, and
that FEMA gives out contracts for water for housing and so on
to very small individuals, sole source.
Is that accurate? Is that--or can you describe the part
that I am missing that makes me feel a little more
understanding of this?
Ms. Lee. Mr. Shays, I was not at FEMA last year so I can't
tell you exactly how that was done. I will tell you that
currently we are prepositioning. We kind of have a three-stage
thing; we are actually pushing things out and prepositioning in
the States in coordination with the----
Mr. Shays. That it not answering my question.
So you have a major international water company that is
willing to provide water at below cost, for free. And they were
having to negotiate with someone who basically worked out of
their kitchen.
Ms. Lee. Sir, I will have to get the details for you
because I am not familiar with that particular activity.
Mr. Shays. This was systematic. I then had the largest RV
company, trailers and so on, and they had to work with someone
who basically was working out of a small office, who knows
where. They had no professional background, they just had the
contract. And so I guess you're new and can't answer it.
Can you, Ms. Duke, respond to this question?
Ms. Duke. I just started as the chief procurement officer
in January. I do know what we are doing for this hurricane
season, like Deidre, but we can get back to you on those
specific situations.
Mr. Shays. Would anyone on the panel be able to respond to
this question? Inspector General or whomever?
General Riley. Sir, I can only respond in particular to the
ice contract. FEMA asked us to procure the ice for them and
deliver it to staging areas, where they would distribute it
from there. But our--we used our advance contract for that.
That was competed, full and open competition. So after that----
Mr. Shays. Who ended up getting the contract?
General Riley. It was the Lipsky ice contract. They have
had it for the 2 years that I have been----
Mr. Shays. How big a company?
General Riley. Sir, I can't tell you that.
Mr. Shays. Where are they located? Do they get it for all
FEMA or just part of FEMA?
General Riley. Sir, we actually look to the States to
procure ice first. And if they are not able to, States will
request FEMA. FEMA will ask us.
Mr. Shays. Does one person in this country have the ice
contract or is it done district by district?
General Riley. No, sir. It goes up to FEMA headquarters and
they will ask the Corps, then, to procure the ice. And we will
do it through our single large contract.
Mr. Shays. I will tell you my suspicion. My suspicion is
some people get these contracts. They have the ability to say
no. They can tell the big company, don't even come in, you have
to work through me. And I think it is a huge problem.
Thank you, Mr. Chairman.
Chairman Tom Davis. Mrs. Maloney, 5 minutes.
Mrs. Maloney. Hi. I want to thank all of you for being
here, and particularly my colleagues from the gulf States that
have suffered so much. And it is very disturbing to see so much
money that was wasted, that could have been used to rebuild
homes.
[The prepared statement of Hon. Carolyn B. Maloney
follows:]
[GRAPHIC] [TIFF OMITTED] T8897.078
[GRAPHIC] [TIFF OMITTED] T8897.079
Mrs. Maloney. I tell you, I want to applaud the work of
Henry Waxman on his reform legislation for contracting. But
when you hear of thousands and thousands of trailers that never
even left Arkansas--because you didn't need them, but paid
hundreds of millions of dollars for them. And it is really
upsetting, particularly when you know how so many people are
suffering. My colleague, Mr. Taylor, his entire home was
destroyed, as was many people's in the gulf region.
And I can understand that right after Katrina you had to
scramble quickly to do some contracts. You handed out these
massive $500 million each to temporary housing missions, and
these were not given full and open competition. FEMA pushed to
put them through. And after the immediate crisis had passed,
DHS and FEMA seemed to recognize that these huge contracts had
been awarded in haste and should be open to competition.
On October 6th, acting FEMA Director Paulson testified
before the Senate, promising that all four contracts would be
rebid. Around the same time, Greg Rothwell, then the DHS Chief
Procurement Officer, assured our staff that the contracts would
be reopened to competition.
And so I would like to ask Mr. Woods, according to the
Federal procurement law, there are exceptions to the normal
rules of competitions in cases of emergencies; is that correct?
Mr. Woods. That is correct, Mrs. Maloney.
Mrs. Maloney. But after the emergency passes, would you
agree it makes sense to open things up to competition to make
sure that the taxpayer gets the best value for the dollar?
Mr. Woods. Yes. After a certain period of time, whatever
exigency might have existed at the time passes, and there is
time for full and open competition procedures.
Mrs. Maloney. When Director Paulson and Rothwell committed
to doing just that, opening up these huge blanket contracts for
bid for competition, that commitment was with the Federal
acquisition rules; is that correct?
Mr. Woods. Well, I think you would probably have to check
with DHS on that. My understanding is some of the contracts for
the installation have been awarded competitively.
I am not sure about the status of the large contracts that
you referred to earlier.
Mrs. Maloney. Well, I know that some were awarded, if I
remember correctly. Reading the briefing materials, roughly 30
out of 70 were; but massive amounts, even after the tragedy,
were no-bid sole source contracts. And after these two
gentlemen committed to opening it up to competitive bidding,
that never happened.
Instead, FEMA and DHS slowly backed away from their pledges
to rebid these contracts. And then in November, FEMA officials
said the contracts would not be rebid until February. But then
in March, FEMA announced that the contracts would not be rebid
at all and would, in fact, be extended.
Now, isn't that in contradiction to Federal law? You can
have an exception for an emergency, but when the emergency is
over--and the emergency was over--you can no longer hide behind
a no bid contract.
Mr. Woods. Well, your premise is absolutely correct.
Certainly at the time of the event, Federal law and the Federal
Acquisition Regulation permit contracts to be awarded in less
than full and open competition procedures. And as time goes on,
that reason dissipates, and at some point we would expect that
agencies would comply with all of the full and open competition
requirements.
The exact schedule and timing of these contracts that you
are referring to, I am not familiar with the details on the DHS
plans in that respect.
Mrs. Maloney. And another thing I find so disturbing is the
same trend we saw in Iraq, where you give huge contracts to
Halliburton, and they build a ditch or whatever, and it doesn't
employ the people there; and then you had these huge contracts,
blue roof contracts, $2,480 per roof to nail blue roof-covers
on them. The local workers told us it would only cost $300. I
am sure Mr. Taylor and others from the Gulf region would have
liked the local workers and the local businesses down in the
gulf region to have the opportunity to bid on housing, on the
roofing, on the removal of the debris and on all the other
things that happened down there, so they are double hit.
No. 1, you hear from Mr. Waxman just a whole litany of the
contracts not fulfilling their obligation, being 10, 20, 30
times more expensive than if you would bid it to the local
communities. So would I like to ask Ms. Duke.
You have now, Ms. Duke, you have now succeeded Mr. Rothwell
as the Chief Procurement Officer for DHS. And did you make the
decision not to rebid these contracts?
Ms. Duke. No, ma'am.
Mrs. Maloney. Who made that decision?
Ms. Duke. We are rebidding the contracts. Would you like me
to review the strategy?
Mrs. Maloney. We were told in March they were not going to
do it. Who made that decision?
Chairman Tom Davis. Gentlelady's time has expired. But why
don't you explain to her?
Ms. Duke. We have a multipart strategy. One is that the
existing four contracts are only being used to complete the
installation of trailers in Louisiana. We have awarded some
local small business and small disadvantaged business contracts
that are going to continue to do the maintenance and then
deactivation of the trailers that were installed in response to
Katrina.
Additionally, we are competing--and that is out for bid
now--the national individual assistance, technical assistance
contracts that will be awarded on a national level. And we are
working with GSA to award some contingency regional contracts.
Mrs. Maloney. So you are taking all these no-bid contracts
and rebidding them as a competitive contracts now?
Ms. Duke. Yes.
Mrs. Maloney. All of them are now going to be competitively
bid?
Ms. Duke. Yes.
Mrs. Maloney. I think Mr. Taylor and others who live in the
gulf region would like to know about your plans and how they
can advertise to local workers and local businesses how they
can bid on these contracts.
Believe me, many people are capable of getting a job done
besides Halliburton. And I am very pleased that you are going
to let the American people compete for the work and the dollars
of the American government.
Chairman Tom Davis. Thank you. Thank you. I don't think it
is limited to just American companies either.
Mr. Pickering.
Mr. Pickering. Thank you, Mr. Chairman, and thank you for
allowing me to participate in the hearings today.
I have two principles, one objective. One, what is best for
the taxpayer? Two, what is best for the disaster communities
and the local community? And one objective: Find the facts and
fix the problem.
There has been a lot of rhetoric. And I have been on the
Senate Committee on Katrina; the Senate committee, we have had
our investigations. And I am more concerned now not about
assigning blame, but making sure that as we go into the next
hurricane season that we have the right assumptions that will
lead to us the right outcomes and the right model.
And so to achieve that, I want to very quickly go through
and establish some quick facts.
Mr. Riley, in Mississippi, you have been tasked, mission-
assigned to do debris cleanup. And as I understand it, you have
been in charge of roughly 21 million cubic yards of cleanup and
debris, is that correct.
General Riley. Yes, sir; that's correct.
Mr. Pickering. And what is the cost to the Corps of that
cleanup, the debris cleanup?
General Riley. Sir, there are different costs depending on
what type of debris we pick up.
Mr. Pickering. Just bottom line, what have you spent in
Mississippi? And what will you spend by the time you complete
your mission sometime in the end of May?
General Riley. Sir, the major contract in Mississippi was
for $500 million.
Mr. Pickering. It's gone over that amount.
General Riley. Yes, sir. Certainly we have gone over that
now, but I don't have the exact figure for that.
Mr. Pickering. Let me see if I can get some clarity. My
understanding is that Ashbritt does the cleanup, that there is
an average of $26 per cubic yard, and that is from taking the
debris from the very beginning to its final destination, about
$26 a cubic yard; is that correct?
General Riley. Yes, sir. And it depends on if they need to
take it to a temporary reductionsite; on average, $26.
Mr. Pickering. After the $26, your overhead management is
roughly $5 a cubic yard; is that correct?
General Riley. Sir, our overhead management is about--it is
about 16 percent of the cost.
Mr. Pickering. If you multiply out $26 plus about 16
percent, that is about $5.
General Riley. Yes, sir.
Mr. Pickering. So your total cost is $31 a cubic yard; is
that correct?
General Riley. Correct, sir.
Mr. Pickering. Now at the same time, we have had local
companies, local entities that have done cleanup and debris
removal. And based on our investigation, on average, you are at
$31 a cubic yard, and local communities, local contracts, are
at around $15 a cubic yard. Do you agree or disagree with that
figure?
General Riley. Sir, there is no way I can compare it
because you really--we don't know what types of debris they are
doing. Are they taking it to a temporary reductionsite? Is it
hazardous material? Is it vegetative? Is it construction and
demolition?
So I really can't make a comparison, nor do I have the
knowledge what FEMA is paying local contracts.
Mr. Pickering. Mr. Jadacki--am I pronouncing it correctly?
Mr. Jadacki. Jadacki.
Mr. Pickering. Have you looked at cost; Corps cost, local.
Mr. Jadacki. We look at the local routinely when we do our
reviews, when the locals decide to do it themselves under a
public assistance program. Again, the price ranges depending on
the type of debris, how far it has to be hauled.
Mr. Pickering. On average.
Mr. Jadacki. I have seen it anywhere from about $13 to mid-
$20 per cubic yard.
Mr. Pickering. On average, about $15, $16. All of our
research--all of our committees, House committee, Senate
committee, local investigations--on average, $14, $15.
Mr. Jadacki. That is in the range we have seen.
Mr. Pickering. So let's do the math. At 21 million cubic
yards at Mississippi times $15, on average, that is $315
million. At 21 million cubic yards times the Corps cost, $31,
that is $651; a differential of over $300 million. Local is
half, Corps is twice as much.
Is that pretty close? That is pretty accurate, isn't it? So
let's go back to my first principle: Best for taxpayer. Local,
national or Corps, based on those figures what would you say?
Local, best; cheaper; faster; better for the local
community? Would anybody disagree with that on the panel?
All right, let's go to some of the other things and, again,
just trying to establish the facts.
Now, the Florida model is what I have just talked about.
They preposition, precontract, and it is all local State. Is
that correct? The Florida model.
Mr. Woods. Yes, sir. When we looked, they don't necessarily
always precontract, but they do know--they have a very good
idea of the supplies and services that they need, and they have
a very good idea of the vendors that are capable of supplying
those.
Mr. Pickering. Do they use national contracts or Federal
Government contracting agencies to do that?
Mr. Woods. They contract on their own.
Mr. Pickering. And what is the result to the taxpayer and
to the local communities?
Mr. Woods. In what respect?
Mr. Pickering. What costs more? What helps local
communities recover faster, better?
Mr. Woods. I don't have an answer to that. I don't have a
basis for comparison on that.
Mr. Pickering. As Inspector General your job is to be the
advocate for the taxpayers; is that correct?
Mr. Jadacki. That is correct.
Mr. Pickering. What would you say; Florida model or
national model is best for the taxpayer?
Mr. Jadacki. Again, I don't have a basis.
Mr. Pickering. It is pretty clear, isn't it? I mean the
evidence is not close. The facts aren't even close here.
What is the intent of the Congress and the Stafford Act? It
is to promote the recovery of local economies and to give
preference to local contractors; is that correct?
Mr. Jadacki. [Nods in the affirmative.]
Mr. Pickering. Mr. Chairman if I could just have 2 more
minutes?
Chairman Tom Davis. Gentleman asked unanimous consent for 2
more minutes. Without objection.
Mr. Pickering. Could you respond on the record, Mr.
Jadacki? Is the local model better for the taxpayer, yes or no?
Mr. Jadacki. In some cases, I am going to count, in some
cases I think the locals may be overwhelmed with debris
removal, and you may need an element of a national organization
coming in to do it.
Mr. Pickering. Mr. Chairman, for the record, if there was a
local community and debris removal that was incapacitated, they
would not have been able to perform in Mississippi at half the
cost and twice as fast.
There is a false assumption that leads to a bad outcome.
And that is local companies and local economies are
incapacitated. Therefore, we have to come in from the Federal
agencies, and national contracts, and displace them and replace
them. It hurts the local community and it hurts the taxpayer.
That is a false assumption. And if we are going to fix this
problem for the next storm, we have to remove that assumption
from our model and from our thinking, Mr. Chairman----
Chairman Tom Davis. Thank you, it keeps them incapacitated
when you have people who are able-bodied to do stuff and you
bring outsiders to do it. I think the gentleman's point is well
taken.
Mr. Pickering. Thank you, Mr. Chairman.
Chairman Tom Davis. Gentleman from Maryland.
Mr. Cummings. Thank you very much, Mr. Chairman, and thank
you for holding this hearing. Thank you for your leadership.
Let me just say that I was looking at an article from back
on December 13, 2005, and it says ``Katrina victims living in
barns.'' It doesn't say ``some folks from overseas somewhere.''
They are not refugees, but U.S. citizens, living in barns.
And I want to just look at this whole issue of travel-
trailers and modular homes. FEMA bought more than 26,000
manufactured and modular homes for nearly a billion dollars.
But only 100 of these were used.
Not one has been sent to the most ravaged parts of
Louisiana, Mississippi, because of FEMA's own regulation bans
their use in floodplains. FEMA also spent $1.7 billion to buy
114,000 travel-trailers. More than $1 billion of these funds
was spent without full and open competition. But now, over
23,000 of these mobile homes and travel-trailers sit unused.
Nearly 11,000 are rusting on runways at airports in Arkansas as
we sit here today.
Again, maybe all of these rules were followed, but how in
the world do we justify this to people sitting in homes,
shaking their heads about the absolute incompetence of their
own government?
And to Mr. Jadacki, tell us, other than Michael Brown, what
higher-ups have been fired? Because I can tell you that there
is not a person in this room--if we had the incompetence that
we have here and the failure to communicate and all the things
we have heard--there would have been a whole lot of heads
rolling. They would not be sitting doing the job.
Other than Michael Brown, can you list the higher-ups who
have been fired, so the American people can get some
satisfaction?
Mr. Jadacki. I am not aware of anybody that was fired for
this, sir.
Mr. Cummings. I am sorry?
Mr. Jadacki. I am not aware of anyone that has been fired.
Mr. Cummings. Nobody has been fired other than Michael
Brown?
Mr. Jadacki. No, I am not aware of it.
Mr. Cummings. Huh.
Now let's go back to why? What is the situation? There is a
list of these questions, and the committee has been great. And
I hear about the emergency, and the emergency is one thing; but
as Mrs. Maloney said, we are past the emergency. This happened
back around August; is that correct? Katrina? Am I right?
Mr. Jadacki. Correct.
Mr. Cummings. All right. We have September, October,
November, December, January, February, March, April, and now we
are in May.
Are we still having trailers sit on lots? Somebody please
answer. Mrs. Duke.
Ms. Duke. We are continuing to install trailers in
Louisiana, yes.
Mr. Cummings. What does that mean? How many trailers are we
installing?
Ms. Duke. We have about 18,000 additional trailers to
install in the next 60 days.
Mr. Cummings. So what does that mean in total?
Ms. Duke. In total, we have about 150,000 trailers and
manufactured homes that would be installed for the victims.
Mr. Cummings. They have already been installed?
Ms. Duke. No. That includes the ones to be installed over
the next 60 days.
Mr. Cummings. No; this is what I am asking you: We are 9
months after Katrina; we are in the 9th month. I am asking you,
there are people sitting here right now that basically do not
have a home. They are trying to figure out what is going on
with our government--one of the most powerful governments in
the world; and they are trying to figure it out, why it is that
we can't get it straight after 8 or 9 months.
What I'm asking you is, what is the demand and how far have
we gone toward that demand for homes for Americans--not
refugees, Americans.
Ms. Duke. We have installed 130,000 of the 150,000 of known
households that need trailers. We have been working closely--
all the remaining trailers are in the New Orleans area; we have
been working closely with the local government and have
clearance now with all the remaining group sites, and are
installing those, and we have a commitment that they will be
installed within the next 60 days. We are working closely with
the New Orleans area representatives on that.
Mr. Cummings. Mr. Woods, you are from GAO; is that right?
Mr. Woods. Right.
Mr. Cummings. One of the things we are trying to do is have
accountability. We, as elected officials, have to be
accountable to our constituents. Government employees need to
be accountable to the Americans citizens.
You have done the report. You have looked at all of this.
What the complaint is that I hear from various people, one
person blames another. One person says, you send them over
here, and then they say, you send them over there; but in the
meantime, a lot is not getting done.
How do we bring accountability to all of this so that it
works for the American people? I am concerned about the next
storm, but I am concerned about the aftermath of this one.
Mr. Woods. Yes, sir, there is no question that
accountability is extremely important here. I think this
hearing is one good example of bringing light to bear on these
issues and ensuring accountability.
I think focusing on the future is, of course, important.
Where do we go from here? How do we fix what's wrong, not only
identifying what's wrong, but assigning accountability? What
are the solutions and how do we move forward?
Mr. Cummings. Have you made recommendations for
accountability?
Mr. Woods. Yes, we have, sir.
Mr. Cummings. Very well.
[The prepared statement of Hon. Elijah E. Cummings
follows:]
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Chairman Tom Davis. I thank the gentleman.
Mr. Clay.
Mr. Clay. Thank you, Mr. Chairman I will try to stay within
the 5-minute time limit.
Ms. Lee, I understand that the Justice Department is moving
forward on prosecuting a sheriff, Billy McGee, who bravely
seized a pair of 18-wheelers full of ice from a military post
and distributed it to people in need. He provided a vital
assistance to the people of Forrest County. He should be
applauded for his leadership.
Secretary Chertoff has been asked to look into this matter
to determine the cause of the bureaucratic breakdown. Are you
familiar with the case?
Ms. Lee. No, sir, I am not.
Mr. Clay. Well, he was a sheriff in Forrest County, MS, who
commandeered two trucks full of ice. And I am just wondering,
why are we going after prosecuting him when he provided
essential services to people?
Let me go to Mr. Jadacki and maybe you can tell me how many
prosecutions have occurred for fraud and ripping off U.S.
taxpayers. Do you have any count on that?
Mr. Jadacki. Yeah. There's literally been hundreds of
prosecutions and indictments. I have statistics I can share
with you after the hearing.
But we're working closely with the Department of Justice to
establish a Katrina task force that is based at LSU in Baton
Rouge. In my experience working with the inspector general for
a number of years, it had to be multimillion dollars or high-
profile cases before U.S. attorneys would even consider taking
a case. In this case, they're prosecuting fraud at the $2,000
level in some cases, a lot of individual assistance fraud going
on right now, and are shifting gears right now into a lot of
contract fraud issues I know they're investigating right now.
But I know there's been about 14,000 complaints that have
been received by the Katrina hotline that we set up
collectively for the Federal Government; and I know there's
been a number of indictments, arrests and prosecutions thus
far, and the number keeps growing.
Mr. Clay. Thank you for that response.
Ms. Lee, what repercussions did FEMA have for staff for
approved contracts which overcharged taxpayers and charged
twice what local firms bid? Have you had to fire any employees
that made these--that made those horrible decisions?
Ms. Lee. Mr. Clay, I have been at FEMA for 4 weeks, and we
are continuing to look at the contracts that are in place to
make sure that they're proper and to make sure that we're
forward looking and that our people are trained and ready to go
for the next season.
Mr. Clay. Ms. Lee, prior to your arrival, did anyone take
any action against employees who made these terrible decisions?
Ms. Lee. Sir, I do not have that information.
Mr. Clay. No one has briefed you on that?
Ms. Lee. No, sir.
Mr. Clay. I mean, look, I am kind of disappointed in this
entire panel, in the lack of responses. Mr. Pickering did not
get many answers out of you. Let me see if I can get another
one from you.
How about you, Mr. Woods? How did the Army Corps of
Engineers justify paying double what local Mississippi
businesses would have bid for classrooms, on the modular
classrooms?
Mr. Woods. I'm glad you raised that sir. We issued a report
just this week that discussed the procedures that the Corps of
Engineers went through to acquire classrooms. They were
assigned the mission by FEMA to acquire portable classrooms.
They went about that very quickly, and they awarded the
contract under an existing agreement with an Alaskan Native
firm.
That firm came in with an initial price; later it came in
with a higher price. And our concern and our conclusion was
that the Corps had information before it that really should
have led the Corps to enter into negotiations with that firm
rather than just accept the prices offered by the firm.
Mr. Clay. Thank you for that.
Let me get my last question in. Ms. Lee back to you. GAO
reported that FEMA spent $10 million to renovate a military
barracks in Alabama, but according to GAO's report--and I find
this astonishing, it had only six occupants, six. Now, I am
sure everyone in the room is calculating that. It comes out to
about $1.6 million per person.
But I do not want to make light of this; this is dead
serious. Can you explain how FEMA threw away $10 million that
Congress appropriated to help the victims of Hurricane Katrina?
And that will be my last question. I want to hear it.
Ms. Lee. Sir, I can tell you that FEMA is taking and has
taken the many, many reports and studies that have been
completed; and those that are continuing to be in work, we are
taking all of those recommendations, taking all of those
things. We have an action plan and are working through the
numerous recommendations.
And, of course, the audits per se--as the general said, we
work through in each contract. We go back and work with the
contractors, we recover the funds when that is possible. We
take action if there is criminal action. So we will be working
through all those activities.
Mr. Clay. Ms. Lee, what should happen to the FEMA employee
who squandered millions of taxpayers' dollars? What should
happen to them?
Ms. Lee. Sir, if we have an employee who took a criminal
act, we need to take the appropriate action.
Mr. Clay. This was stupid. Why don't you do something about
stupidity over there.
Thank you, Mr. Chairman. I'm sorry.
[The prepared statement of Hon. Wm. Lacy Clay follows:]
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Chairman Tom Davis. Thank you very much. Let me just add,
was the Alaska Native contract--is that a competitive contract
or was that sole-sourced on that?
Mr. Woods. That was sole-sourced. There was an existing
agreement with the firm, and they placed a noncompetitive order
under that agreement with the Alaska Native firm.
General Riley. Sir, of course, the initial agreement was
competed by the Army. It was an existing agreement by the Army
that we went to, that they had competed earlier, and we went to
that.
Chairman Tom Davis. So this is like a task order?
General Riley. Yes, sir.
Chairman Tom Davis. OK. Ms. Watson.
Ms. Watson. I want to thank you, Mr. Chairman, for holding
this hearing. We need more of them.
And I want to apologize to the panel for having your
superiors send you here when you are brand-new and you do not
have the background.
I just heard it said that there were 130,000 mobile homes
that have been instituted. Our report from our staff who do the
research--and this report is marked May 3rd says that FEMA
purchased 26,722 manufactured and modular homes at a cost of
$915 million, but only 100--100, not 130,000--of those homes
have been used to house evacuees or the relief workers.
If that is not true, I would like you to submit it to me in
writing, please.
And I would hope, Mr. Chairman, that next time we have
people here who are onsite, not new people who have to carry
the load for ridiculous mistakes that were made by FEMA during
a time of crisis.
One of the cornerstones of sound contracting practices is
full and open competition. And I heard that Halliburton--and we
have $9 billion missing as it relates to Iraqi services--they
get the contract firsthand.
But anyway, in the case of Hurricane Katrina, full and open
competition has been the exception rather than the rule. So as
you plan forward, take that into your consideration.
Mr. Jadacki, I would like to walk you through some numbers
from the semiannual report to Congress released by the
President's Council on Integrity and Efficiency on April 30th.
According to this report the Federal Government has awarded
$9.7 billion in private contracts for the recovery; is that
right?
Mr. Jadacki. That's correct.
Ms. Watson. According to this report, a huge majority of
the contracted amount, $9.3 million, was awarded in 1,203
contracts worth more than $500,000. True?
Mr. Jadacki. That is correct.
Ms. Watson. The gold standard for Federal contracting is
full and open competition, OK?
Mr. Jadacki, of the 1,203 contracts worth more than
$500,000, what percentage were issued with full and open
competition?
Mr. Jadacki. I believe about 700 were awarded with limited
competition, so that would leave about a quarter of those with
full and open competition, about 25 percent possibly. I do not
have the numbers in front of me, but roughly that much.
Ms. Watson. OK. At the Department of Homeland Security,
54.6 percent of these large contracts were awarded on a sole-
source basis without any competition at all.
Why is the administration so adverse to competition and why
does it hand out over two-thirds of the contracts on a
noncompetitive basis?
Mr. Jadacki. I cannot answer the question on the
administration.
I know that during the crisis, immediately after the
disaster, a lot of contracts for immediate needs and
necessities were awarded on verbals or with limited
competition.
Again, as Mr. Woods pointed out, after the crisis period is
over, the agencies need to go back and take a look and see
whether the services or goods are still needed and whether
those contracts need to be renegotiated or terminated, if
necessary.
Ms. Watson. September 2005, September, FEMA awarded $3.1
billion in contracts which is--57 percent of which was
noncompetitive.
October 2005, FEMA awarded $595 million in contracts, 75
percent which were not full and open competition.
November 2005, FEMA awarded $256 million, or 80 percent,
without full and open competition.
And as of February 13th of this year, FEMA awarded
approximately $4.8 billion of contracts for reconstruction; 62
percent of these were awarded without competition.
And we mentioned the rebidding of four large contracts, and
as of March--this is May--as of March 2006, FEMA announced that
these contracts would not be rebid, but would be extended.
I really don't understand why we are not protecting the
taxpayers' dollars.
I have been down there to the lower Ninth in Louisiana. It
is a shame to see the debris still in place and to look at
that. Something is wrong and somebody has to be held
accountable for it, and Ms. Duke and Ms. Lee and Ms. Murphy,
you have that on your shoulders now to see that we do a better
job for American citizens.
Ms. Lee. Yes, ma'am.
Ms. Watson. Thank you, Mr. Chairman.
[The prepared statement of Hon. Diane E. Watson follows:]
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Chairman Tom Davis. Let me just note that we have these
folks here because they are the decisionmakers today and that's
who we have to get at.
But during the Katrina hearings, we did get some of the
people who had made the decisions earlier, and they were
appropriately chastised.
Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman and ranking member. I
also want to welcome and thank Mr. Taylor and Mr. Pickering for
their participation.
The central mission of this committee is to provide
oversight of government contracting practices, whether it be
Halliburton or KBR in Iraq or major highway projects in which--
in my district where Bechtel was involved.
But basically what we are trying to do is two things: One
is to ascertain the costs of the work being done, and second,
try to determine whether or not it is reasonable or not.
So when we figured out the costs of providing temporary
housing after Katrina, we sought to do our job on this; and in
particular, I want to look at the Carnival Cruise Lines
contract, which caught my eye. I must admit I have never been
on a cruise, but the numbers here are stunning I think. I
actually live in a pretty high-cost-housing State, and I wanted
to make sure that these numbers were right.
According to what we have from DHS, the Carnival cruise
ship contract is now over, so we can take a good look at it--
the cost--the total picture, it cost $236 million, $236
million. It ran for 6 months, and based on the occupancy
figures that we got--now, when Ms. Watson and the chairman led
us down on a codelright after the hurricane--and I know there
were some problems with getting people onto the cruise ships,
and I do not know why, but there was--but based on the
occupancy figures from DHS, it cost over $53,000 to house each
individual on board the ship. That comes out to about $300 a
night for an individual and, obviously, $600 a night for two
people.
Now, the way that GSA looks at this is, we try to do comps;
that is shorthand for comparable properties or comparable
accommodations. And so what I did was, I asked, we all asked
minority staff to come up with some comps on what $600 a night
for a couple might get us and what $300 a night might get us
for an individual so we would know whether or not those are
reasonable.
Now, this is a fairly boilerplate process, but I have to
admit even though I come from, I represent the Ninth
Congressional District in Massachusetts, which includes Boston,
which is fairly high in terms of housing costs, I have to admit
I was extremely surprised when I got the results.
Mr. Chairman, I don't know if we have the ability, I know
we have some photographs of the properties we came up with to
basically--I would like to put them up. Here is one property
where we could have put people up at for $300 a night, or $600
a couple. It is the Bellagio Hotel and Casino in Las Vegas,
which is pretty nice. I have never been there either, but it
looks nice; and it is rather stunning that when we think we are
trying to do temporary housing for these folks, this is what we
are paying for them. And you could stay in this hotel in a
suite, not just a room, you could get a full suite for the
money we paid to house these folks in the cruise line rooms.
Second, I asked them to do a broad assessment. The next
property that they came up with was actually, it looks a little
bit like the chairman's house down in Virginia, but it is not.
It is actually a castle; it is a 12th century gothic castle.
You could actually rent this for less money than we paid to put
up these folks on the Carnival cruise ships.
If it was not the taxpayers paying for this, this would be
humorous. And if it was not the fact that the folks that we
were trying to help went without our help. That is the other
side of this. It is not just of the shortfall on the taxpayers'
side, but the fact that the goodwill of the American people was
put forward; it just never reached the people we were trying to
help. And they desperately needed our help.
This castle actually has a premier golf course, as well as
an equestrian center for those who play polo. It is just a good
indicator of what we could have done.
Last, there is also another comp here and this is actually
the Trump Towers, this is the Trump World Tower in New York
City. This is where Bill Gates and, I think, Derek Jeter live.
This would have been cheaper. It would have been cheaper to put
our folks up at Trump Towers than it was to have FEMA house the
hurricane survivors on these Carnival cruise ships.
Now, the exasperating part of this is that Carnival Cruise
Line followed the rules. That's what bothers me. They followed
the rules. They did not commit fraud. They have actually stayed
within the guidelines and were able to get away with this,
within the rules, within the law, within the guidelines, and
that's a disgrace. That's a disgrace.
I want to ask Ms. Lee what controls are in place to prevent
the administration from awarding contracts like these, which
are frankly absurd and shocking to the average sensibilities
out there, not only those of the Members of Congress but also
of the American taxpayer.
Ms. Lee. Mr. Lynch, as has been talked about here by the
other members, we strive to have competitive activities and to
plan ahead. As you well mentioned and have discussed, in times
of emergency, things are done much more expeditiously; and
sometimes, in hindsight, we say, well, we could have done
things differently.
So what we're trying to do this year is plan ahead, make
sure we're better prepared and have contractors ready and
activity ready to respond to the emergencies that we face in
the future.
Mr. Lynch. I am going to let this go, Mr. Chairman, because
I feel I have used up my time. We had advance notice of this.
You think, people in the water, you automatically think boat,
you think cruise ship, probably a good idea.
It was the administration of the contract and what we paid
these folks that was decided afterward where we fell down.
And I am going to leave it at that, but I am going to ask
an open question for anybody on this panel. Can anybody justify
this contract and what the American taxpayer paid for what we
got and what the people in New Orleans and Louisiana and
Mississippi got?
OK. Thank you.
I yield back.
Chairman Tom Davis. Thank you. Let me say, my understanding
of the whole cruise ship issue is, the government got
themselves in a situation. The cruise ships had to cancel
passengers and everything to go there, and they basically said,
if we can break even.
I do not think they are the culprits here. The culprit is
the government was reduced to that was their best option, given
the planning of it, I think is the gentleman's point.
Mr. Lynch. That is not my understanding, Mr. Chairman.
Chairman Tom Davis. We held previous hearings on that in
our Katrina committee, and the cruise ship had to cancel
passengers that were already booked to make themselves
available.
But the government got themselves--that was the best thing
to do because they hadn't done the planning.
Mr. Lynch. If you compare what they would have gotten?
Chairman Tom Davis. Correct, but they were already booked.
Mr. Lynch. They weren't getting $600 a room.
Chairman Tom Davis. But cruise ships also have beverages
and everything else that go with the rooms.
Mr. Waxman. Mr. Chairman, they would have expenses with
these other passengers because they would be traveling and
moving from port to port on a cruise. Here they were in one
place, so they got compensated for what they would have had and
then some.
Chairman Tom Davis. Well, that is the government's fault
for negotiating that. My point is, at the end of the day, we
had few options; and had proper planning been in place, we
would have had other options for handling this and bringing
cruise ships in. They advertised out and only a couple cruise
ships responded. Everybody was booked.
Mr. Van Hollen.
Mr. Van Hollen. I want to thank you, Mr. Chairman and Mr.
Waxman, for your leadership on this issue. I want to thank all
the witnesses that are here to testify.
I must say the American people, listening to the testimony
today and the stories that have come out regarding waste, fraud
and abuse, I think have to be disappointed that a number of
unscrupulous contractors decided to take advantage of a
situation, and that there were not mechanisms in place to
better prevent that. Because as has been said, people
throughout this country responded after Hurricane Katrina.
People opened up their homes, their hearts and their wallets.
What we have learned more recently is, there were a lot of
people who--while most Americans are opening their wallets,
there were a few people heading down there to fill up their own
wallets at the expense of the victims of a natural disaster.
And I think it is incumbent upon all of us to learn the lessons
and put in place better mechanisms to prevent that from
happening in the future.
I just want to focus in on one of the particular cases and,
General Riley, if I could ask you about the whole issue of the
blue roofs. Obviously it is a good idea after a hurricane to
try and cover up the roofs of houses that have been blown off.
If you have a roof that has disappeared and blown off, you want
to prevent further damage and put a tarp or something over it.
But you also want to make sure it is done in way that you don't
gouge the taxpayer.
And so I want to ask you a couple questions about the blue
roof contracts, because I believe a lot of work that has been
done by the Army Corps of Engineers reveals that sort of gross
waste, fraud and abuse in this area.
And I understand--and this is based on the documents that
have been provided to the committee--that contractors could not
locate their crews in the field and that they didn't ensure
that the workers were being paid, that they failed to followup
that the work was actually done before submitting the bills to
the Federal Government.
So let me just ask you about what value you believe the
prime contractors added to this process. My understanding is
that what the Corps has found is, they hired subcontractors
who, in turn, hired subcontractors who, in turn, hired
subcontractors. There were at least three tiers of
subcontractors, and the work was not done, and thousands of
dollars, on average, were paid per roof in the end.
So if you could, explain what value, if any, you think the
American taxpayer got out of paying those prime contractors.
General Riley. Sir, if I might, the beauty of the blue roof
program vice debris program is, we can go back and verify every
single roof and the size of that. Our quality assurance
personnel were all issued cameras, so when they went around,
they inspected the roofs. And then at the end, before we close
out the contract, we make them go back and verify how much
plastic was actually installed on the roof. We can in a much
simpler fashion verify what the contractor has done or not
done.
In some cases, we found that the contractors' quality
control that they had in place--we are responsible for the
quality assurance, to make sure that they have a quality
control program in place, and that's where our auditors and our
assurance people find out where it may be lacking and we need
to strengthen the contractual controls.
But in the end we win when it comes to blue roofs because
we go back and check every single one of them.
Mr. Van Hollen. Have you made sure that the contractors
didn't get paid for the work that was not done?
General Riley. Yes, sir, before we close out the contracts,
we inspect every one of those roofs. There are differences with
different roofs, but we can verify it through witnesses,
through neighbors, through camera views that we have to do our
work in that fashion.
Mr. Van Hollen. How about the prime contractor? My
understanding is one of the prime contractors, the Shaw
company, claimed themselves that the roofing has been
completed, that was part of their job on your behalf was to go
out and find out whether the work had been completed.
They said it had been completed, but when your folks went
out, they found that there was no blue roofing installed
despite the contractor's claims of completion. The auditors
concluded that the prime contract, ``is failing to adequately
monitor and inspect the roofing efforts of its subcontractors
and crews, as required.''
They went on to make other findings. Were you aware of
these particular reviews with respect to that prime contractor?
General Riley. Not those particular, but I certainly
believe the auditor report when they tell us that a contractor
isn't doing his job of quality control, because we're highly
interested. We pay them to do that as part of the contractual
agreement, so that's why we send our auditors out to find them
out.
Mr. Van Hollen. Has the prime been penalized for their
failure? Have they stated it to you?
General Riley. In this contractor, I believe there is a
retainage that we withheld, and he won't get paid until we
verify the roofs.
Mr. Van Hollen. Let me just, if I may, Mr. Chairman, in
closing--one of the criticisms that's been leveled, and I think
a fair criticism, is a failure to hire more local contractors
who are more familiar with the territory and cut out the four
or five layers of middlemen involved in this. But this morning
there was a report on National Public Radio with respect to
some of the new contracts that had been let in this effort to
get more local contractors. And as it turned out, despite I
guess efforts to do so, a lot of contractors on that turned out
to be from out of State.
In fact, one of the biggest winners was PRI-DJI, which were
two joint-venture California firms; and it turned out that one
of the partners in that joint venture was, in fact, a
subsidiary of one of the large firms that received an initial
no-bid contract.
This question, I guess, goes as well to representatives
from FEMA, DHS. What precautions are being taken to make sure
that people are not gaming the system and essentially trying to
end-run the effort to go to local contractors by simply finding
a local contractor, but really the main profits and benefits go
to some big out-of-State entity?
Ms. Lee. I believe you are talking, if I understand the
reference correctly, about the small business contracts that
are being let before regional support to take over the
maintenance of the temporary housing. One of the principles of
that competition was, in fact, that we would compete with a
preference for locals; and that preference happened to be a 30
percent price differential, so any local would be priced at
what they proposed and any nonlocal would have a 30 percent
price differential applied.
And because of the importance of getting it right for the
taxpayer, there is a balance there. And so in some cases if a
local's price was not within those parameters, a nonlocal could
have won it. But it was a small business or an 8(a) company.
Mr. Van Hollen. So under this case it could have been a
situation where the bid from the out-of-State big one was that
much----
Ms. Lee. Yes, sir. If those are the contracts we are
talking about, yes, sir.
Ms. Duke. And that preference under the Stafford Act is the
way FEMA has done it traditionally. Recently, the Stafford Act
was amended to allow set-asides for only local businesses, and
we will be using that new authority given to us by Congress.
Mr. Pickering [presiding]. Thank you.
Mr. Taylor.
Mr. Taylor. Thank you, Mr. Chairman. I appreciate your
letting me sit in on this hearing. I am going to take a little
bit different tack than my colleague from Mississippi, and I
think it is different from being actually in the storm and near
the storm.
Colonel, I agree that in the immediate aftermath of the
storm, things were so chaotic with the lack of fuel, lack of
electricity, no flushed toilets, I mean, go down the list--no
food--that you almost had to bring in help from outside. But
within about 30 days things were starting to get halfway back
to normal. Within 30 days, there were banks open. Within 30
days, there was some fuel available locally and an occasional
grocery store.
What troubles me is that these contracts were let for a
value of money--in the instance of debris removal, $500
million--that was not reached for several months. And what I am
seeing in the case of both FEMA and the Corps--and I hope this
is wrong, because this is in a publication prepared by staff--
it says, you are not looking at shorter contracts, you are
looking at 5-year contracts.
For the ladies from FEMA, geez and Pete, I have never seen
more incompetence than in the delivery of FEMA trailers; and I
would ask the staff to give you two letters that I sent to your
Secretary, Mr. Chertoff, February 7th.
There is a lady in the room who reports for the hometown
paper. She reported a couple of months ago that it cost $70,000
for a FEMA trailer, which got a number of phone calls to my
office. In fairness to FEMA, I wrote to your boss and asked,
what does one cost? What does it cost to deliver to Hope,
Arkansas? What does it cost to bring it from Hope, AR to
Purvis, MS, from Purvis, MS to Kiln, MS, from Kiln, MS, to a
home site?
It is 90 days later; they have never answered that.
Now, if you are proud of the job you are doing, I would
think you would want to get back to me in a hurry and say, no,
it is nowhere near $70,000.
It has been 90 days, so the only number in the minds of the
people of south Mississippi is what Ms. Grandinette published
in the Sun Herald is $70,000.
So what I am saying is, I hope the staff report is wrong
because if you are telling me the answer to contracts that are
too big and too long is to make them bigger and longer, that is
insane. The only people who have a longer contract than that
are U.S. Senators.
And I am serious. Public school teachers get a 1-year
contract. In Congress we get a 2-year contract; it keeps both
of us on our toes. A shorter contract, in my mind, is a better
contract. You can always put options in there for someone who
is doing a good job to continue it.
On the flip side, if you give someone a 5-year noncompete
contract, you can almost bet there is going to be feather-
bedding. You can almost bet they are going to have every
brother-in-law in the contract. You can almost bet that they
will be paid for their mistakes.
In the case of the Bechtel contract at their site on Main
Avenue, the day I went they had 30 trailers that they had
cannibalized. Say let's say it is only $15,000 a trailer. By
pulling out the air conditioning unit on that $15,000 trailer
and leaving it open to the rain, you have now got $200 worth of
a scrap aluminum, which was a $15,000 trailer.
Next to it were approximately 200 trailers that had been
removed for quality reasons. Ninety percent of them came from
one manufacturer; the same name is on them. I am not going to
say it publicly because I don't feel like paying for a libel
suit, but you know the name.
I say, 90 percent of the rejects are coming from one
manufacturer. You are buying from five manufacturers. Why do
you keep buying from these guys? And your answer was, we've got
a contract. We've got a long-term contract.
So long contracts create the kind of inflexibility that
leads to the public being angry, leads to me being angry and
leads to the feeling of the public that you are throwing away
money as you are not meeting their needs.
And again, I'm sorry it's you two ladies here today. I wish
your boss was here to take your place. But you are the only
folks from FEMA here today.
Again, it boggles my mind.
And I will use the converse, OK? The general over there
took a beating from Mr. Waxman, but apparently the information
Mr. Waxman used was an internal study conducted by the general
to see if his operation was being done right, and they found
that people were cheating them. I saw nothing like that in the
case of the FEMA trailers. The trailer would arrive at Purvis,
MS. And because so many people were calling me, I took the time
to walk through it myself.
It arrived at Purvis. They would check the gas. No one
bothered to see if the microwave worked. No one hooked it up to
a water hose to see if you had plumbing leaks. No one ran it
through something as simple as a pressure washer to see if it
leaked from the outside. So at that point, it is no longer the
manufacturer's problem; it is the taxpayers' problem. So you
have a second contractor paid a fortune to send people out to
individual locations all over south Mississippi to fix the
things that should have been fixed when we, as a Nation,
accepted delivery.
Why are you paying one driver to take it from the factory
to Hope, AR, and another to Purvis, MS, when we know we are
buying 35,000 of these things. Why don't you put a whole bunch
of them on a train? I mean, simple business decisions that
anybody who has said, we need to get better--you never in the
entire process of that contract got better. In fact, your best
day for delivering trailers, if my memory is right, was in
October. You delivered about 350 in 1 day. By November, you
were going slower than that. December, you were going slower
than that. January, you were going slower than that.
So everyone else on Earth has a learning curve and gets
better. Y'all never got better because your contractor had no
incentive to get better because he had a noncompete, no-bid
contract, and so he got paid for every mistake he made. If a
trailer was brought to a site and the site was not ready and it
came back, the driver got paid. And he got paid the next day to
bring it back to the same site.
Tell me that's a good idea. Tell me that's good for the
taxpayers, because I can tell you about lots of citizens who
are living on their mother-in-law's couch or in an Astro Van,
waiting for that trailer, who were enraged to see it pulled up
only to be taken away.
It is a travel trailer. Every weekend moms and dads across
America go to travel parks, hook it up to a water hose, hook it
up to a sewer tap, plug it into the electricity. It is not
complicated. Why did it take six inspectors to go look at the
site?
These are things that average Mississippians were seeing
every day as their blood was boiling, as they were waiting for
their trailer that, by the way, their fellow citizens were kind
enough to provide; but everyone knows their fellow citizens had
to pay way too much for it and it took too long to deliver.
So we are going into another hurricane season. If you look
at the NOAA weather boards, the Gulf of Mexico is 10 degrees
warmer today than a year ago today. The Navy oceanographic lab
tests tells us we are in for 10 years of this. This is not
Greenpeace; this is the U.S. military.
So what's the plan for the 39,000 travel trailers that are
now in south Mississippi? Are you going to move them? Are you
going to stage them in the event of a storm? Are you going to
tell people to take them with them?
Because let me tell you--and I am so much luckier than
most--when folks lost everything, suddenly that's all they have
left in the world, and they waited 2, 3, 4, 5, 6 months to get
this, you know what the tendency is going to be? I am not
waiting 6 months for the next one. I am taking this with me. So
they will hitch it behind a Toyota pickup truck or a Dodge
Dart, and if we thought we had evacuation problems before, when
an undersized vehicle is trying to pull that travel trailer out
in high winds on clogged roads, think of the problems you will
have.
The next thing is--I asked Secretary Chertoff this months
ago when he was looking for suggestions--again, it has become
their cocoon. It is just human nature. It is the one place I
have left that's safe in the world. There is going to be a
tendency not to leave that cocoon.
And I asked Secretary Chertoff for something as simple as
taking that travel trailer, sticking it in a wind tunnel, stick
a television camera in there and let people see what is going
to happen to it, because it is going to fly apart. And the
walls will become shrapnel and people are going to get killed.
Three months later, we are that much closer to hurricane
season, and we have not heard a word.
Ladies, again, you just happen to be the representatives
from FEMA who are here. I'm sorry you had to be the ones. I
wish it was a couple of guys I could pick on. But these things
are real concerns, real waste that your agencies have to
address. And it is a shame that we did not do it the first
time, but truly it would be shameful behavior on the part of
our Nation if we do not address it before this summer.
I would like to hear your thoughts on that.
Ms. Lee. Mr. Taylor, I received this letter and we will get
you an answer, and I apologize for any delay; we will certainly
look into that. And we will be happy to bring over people if
you want a specific briefing on the housing plan or the
evacuation plan because there are plans. So I would be happy to
have the expert program managers come over and give you and
your staff or any other members those briefings if you would
like more details.
Mr. Taylor. Let's just start and again I am going by a
staff memo that might be incorrect so if it's incorrect you
tell me. But if your answer and if the Corps's answer to
contracts that are already too long is to make them 5 years,
that is insane. And if that's what you plan on doing
administratively, I think this committee needs to know, because
we need the opportunity to try to prevent that legislatively,
because that is the not the solution.
So that is the first question: Are you really looking at 5-
year contracts?
Ms. Lee. We are looking at contracts with longer terms with
options, as you mentioned, so we will continue to monitor the
performance.
We have also put in place contracts that have an ordering
period and so you can order against them for a certain period,
but if the performance is not acceptable at any time we can run
another competition and get additional support. Or if someone
is really not performing, of course, there are normal remedies,
which is either termination for default because they are not
performing properly, or we can terminate for convenience.
So we do have those flexibilities.
Mr. Taylor. Because this is a real-life scenario; again,
people are waiting for that trailer, it is not a big deal.
It is a big deal, trying to find a place for them to live;
someone is not getting the job done.
What is your recourse and how quickly can you put someone
else on that job? Because I can tell you your representatives
that I dealt with, to a man or a woman, said, We are stuck with
this contract with Bechtel. They are going to get the first
35,000 trailers. There is absolutely nothing we can do about
it.
And believe me that is not a good thing for them as
citizens. It is a horrible decision on our Nation's part. So
how are we going to keep that from happening again?
Ms. Lee. We are putting in place a variety of contracts. In
fact, as you mentioned, the individual assistance, technical
assistance contracts, the proposals are in now. We are
evaluating those. And what we do plan to do is to have not just
one, but a number of contracts in place, which we will place
orders against when the need arises.
And as we have talked through here----
Mr. Taylor. Walk me through that, for instance. How would
you fix that for instance if it happens again this fall? How
would you cancel that contract and bring somebody in who's
going to do a better job of delivering those trailers on short
notice?
Ms. Lee. Because we have awarded more than one contract, if
one contractor is not performing, we will stop placing orders
against them and place the orders against other contracts that
are already competitive and in place--kind of the advanced
contracting concept.
Mr. Taylor. And that's in place right now?
Ms. Lee. The proposals are in. We're getting ready to award
those contracts.
Ms. Duke. Additionally, there's two changes to the
contracts that Ms. Lee is mentioning. They are 1-year contracts
with two options; so they are a maximum of 3 years. Because we
are constantly looking at our housing strategy, we didn't think
a long-term contract was in place.
The second thing is, we share your concern with a single
chain of custody. So there is a provision to have less changes
of ownership, if you will, or custody during the installation-
of-trailer process so it is easier to hold either us or the
contractor, whoever is appropriate, accountable if there are
damages or any incidents during the process.
Mr. Taylor. Again, I would welcome the opportunity to visit
with you at length since I do have some, I think, very valid
concerns.
Ms. Duke. Yes, we would like to do that, Mr. Taylor.
Mr. Taylor. Thank you.
Chairman Tom Davis. Thank you very much. Mr. Pickering, you
had one followup, I think.
Mr. Pickering. Mr. Chairman, I want to take a second to say
to General Riley, I know that you have been trying to make it
better on the ground, and your people in Vicksburg have been
very committed. You have tried to go out and give contracts to
local companies. You started in December. So a lot of the
issues that are raised in the last hearing, you have tried to
address, and I commend you for doing so.
Unfortunately, the contracting process now allows an
incumbent contractor to protest in such a way that you are not
able to fulfill congressional intent and what is best for the
local community because of the ability of incumbent contractors
to protest and delay. So I do want to commend you, but that
goes back to the question Mr. Taylor was raising on trailers.
Once you go down one path of contracting, you cannot get
off of it. It takes you a year, year and a half, to take a
contract away from an incumbent contractor if there is a
protest process each step of the way.
So I hope, Mr. Chairman, that we can look at greater
contract transparency and also ways to give you greater tools
so that we can fix the problems so you can achieve your
objectives in a more flexible way.
Mr. Waxman. Mr. Pickering, would you yield to me?
Mr. Pickering. Yes.
Mr. Waxman. I think you are making an excellent point.
One of the frustrations that I am feeling is that we have
auditors after the fact, and the auditors can pick up some of
the problems and sometimes they cannot. But the problem that I
have seen over and over again, Katrina and Iraq, some of the
homeland security contracts, is, the government goes to a big
contractor, gives them the contract. They end up with a
monopoly over that contract and the work to be done, and then
they hire subs.
The government ought to be negotiating with the people who
can do the job directly. It would certainly make it easier to
get the job done. It will help the local people, and it would
be at a fraction of the price.
And so I think we are making this mistake over and over
again, and I hope one of the lessons we can learn is, we need
to rethink how we are doing these big major contracts so that
we can be more effective.
Chairman Tom Davis. Thank you.
Let me add also, particularly in some of these debris
removal and things like that, it is not a high-skill level, so
you have local workers that can get into this. It is one of the
fastest ways to bring the local economies back. And from my
observations being on the coast three times, the areas where
you had the locals letting these contracts, it happened
fastest, there and I think at lower cost, but certainly it got
to work faster than having to go through the top.
But I think on those kinds of basic services, it is
probably in the taxpayers' interest and everybody's interest to
go local.
Mr. Taylor. Mr. Chairman, 20 seconds.
Ms. Murphy, shame on me if I do not mention the good work
of the GSA. Within 3 or 4 days of the storm, realizing that my
local offices had been washed away, I think two, three, three
trailers were delivered by the GSA so you actually had a
trailer there for my local offices, before phone service,
before electricity.
So, again, not everything our Nation did went wrong. And
for those people who really leaned forward, I want to commend
you for that.
Ms. Murphy. Thank you, sir.
Mr. Pickering. Mr. Chairman, I just wanted to wrap up.
I know a lot of the things that happened in Katrina were
based on the policies in place pre-Katrina and that everyone at
these tables are the implementers of these policies and the
implementers of false assumptions.
And so my message, really, to the policy and
decisionmakers, Secretary Chertoff and President Bush, is that
we hope to see the policy changes on contracting and any
reforms necessary legislatively and administratively because,
Mr. Chairman, we are planning to move major disaster reform
legislation before the Memorial Day recess, before the
hurricane season.
And I will be submitting questions on a number of different
issues, as well as asking the Department of Homeland Security
and FEMA to change assumptions and to change policies and to
communicate back to us in a very timely way as we move major
disaster reform through the House of Representatives.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you very much. I will dismiss
this panel, and we will move to our next panel. We are
expecting votes some time in the next not too long, so I want
to move as quickly as I can to get the testimony in.
We have Mr. Randall Perkins, the president of AshBritt,
Inc.; Mr. George Schnug the CEO of AmeriCol Logistics; Mr. Neal
Fox, a member of the Board of Advisors of FedBid, Inc.; and Mr.
James Necaise, the president of Necaise Brothers Construction.
It is the policy of the committee that all witnesses be
sworn before you testify, so when you get up here, if you would
just remain standing and raise your right hands, we will swear
you in and begin the testimony.
Mr. Necaise, I understand you have somebody reading your
testimony; is that correct, a Mr. Machado?
Mr. Machado, if you will raise your hand with everyone
else.
[Witnesses sworn.]
Chairman Tom Davis. Thank you for your patience. We will
just move ahead.
Mr. Perkins, we will start with you.
STATEMENTS OF RANDALL PERKINS, PRESIDENT AshBRITT, INC.; GEORGE
SCHNUG, CEO, AmeriCOLD LOGISTICS, INC.; NEAL FOX, MEMBER, BOARD
OF ADVISORS, FedBID, INC.; AND JAMES NECAISE, VICE PRESIDENT,
NECAISE BROTHERS CONSTRUCTION, ACCOMPANIED BY DAVID MACHADO,
STAFF ENGINEER
STATEMENT OF RANDALL PERKINS
Mr. Perkins. Mr. Chairman, committee members, my name is
Randy Perkins, and I'm president of AshBritt, Inc., an
environmental services company with expertise in a range of
disciplines that fall into one or more of these four divisions:
disaster recovery services, solid waste services, engineering
services and special environmental services.
Your committee's letter to me, dated April 20th, asked that
I address three matters, the first of which was that I provide
an overview of AshBritt and the goods and services that it
provides; the second of which concerns AshBritt's role as the
contractor to the Federal Government; and the third of which
requests my own personal views regarding certain contracting
vehicles, methods and policies.
In response to the first request regarding AshBritt's goods
and services, I would observe my firm has, especially over the
last decade, created a network of resources capable of dealing
with a range of services from emergency needs such as road
clearance, debris removal to demolition of unsafe structures,
decontamination and fire suppression reports.
Regarding the committee's second area of interests in
AshBritt's roles and responsibilities as a contractor with the
Federal Government, it is first necessary to explain Hurricane
Katrina's size and scope elevated the Federal response from the
usual circumstances of FEMA oversight of the local and State
governmental contracts for storm damage recovery to one in
which FEMA tasked the U.S. Army Corps of Engineers with the,
usually, locally initiated contract responsibilities.
Ordinarily, AshBritt deals with a city, county or local
agency in assisting its efforts to recover from a natural
disaster, while achieving compliance with the rules and
regulations promulgated by FEMA for reimbursement to the local
government entity. However, AshBritt in the year 2002 has been
successful in a nationwide competitive selection process
through which the U.S. Army Corps of Engineers pre-positioned
contractors for separate geographic regions of America as a
resource in the event of a major catastrophe such as that
subsequently caused by Hurricane Katrina.
AshBritt was in the third year of its contracting involving
the Louisiana/Mississippi region when FEMA made the decision to
task the Katrina debris removal to the Corps. The specific role
given AshBritt is detailed in its contract with the Corps of
Engineers and consists of debris collection, temporary storage
at reductionsites, debris reduction, and quality assurance that
includes supervision to ensure compliance with governmental
requirements and regulations. AshBritt's experience and
expertise results from years of dealing with dozens of local
government entities around the United States.
Finally, the committee expressed a third area of interest
asking my personal views of contracting vehicles, methods and
policies, generally concluding with my views of the set-aside
and local contractor provisions under the Stafford Act. I do
not feel qualified to suggest Federal policies for contracting.
I do feel qualified to comment about one aspect of the U.S.
Army Corps of Engineers pre-positioned contractors process, and
that is the geographic selection.
The Corps of Engineers specifically chose to select
experienced contractors with ability to respond to emergency
situations, but did not want the contractor to potentially be
incapacitated by the same emergency. I concur with this
assessment; consequently, I have no complaint that the Corps of
Engineers did not select my firm or another firm in Florida as
the pre-position contractor for the State of Florida. A
Tennessee firm was selected.
Similarly, an Alabama firm was selected--excuse me.
Similarly an Alabama firm with which AshBritt is familiar and
who AshBritt works with was selected for the State of Alabama,
but is working as a contractor for response to need resulting
from the damage caused by Hurricane Rita in Texas. This kind of
geographic pre-positioning is good planning for an event of the
magnitude of Hurricane Katrina.
Regarding any other Federal contracting policy, I do not
have the expertise in Federal contracting policy to make
legislative or regulatory suggestions, but I can and am proud
to outline what AshBritt has done in the furtherance of its own
Federal contractual tasks and in compliance with existing laws
and regulations. Thank you.
Chairman Tom Davis. Thank you very much.
[The prepared statement of Mr. Perkins follows:]
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Chairman Tom Davis. Mr. Schnug.
STATEMENT OF GEORGE SCHNUG
Mr. Schnug. Chairman Davis, Mr. Waxman, invited guests, my
name is George A. Schnug, and I am the chief executive officer
of AmeriCold Logistics. Thank you for inviting me to appear
today. I appreciate your interest in this issue and I hope my
comments today are helpful and responsive. I have submitted a
copy of my statement for inclusion in the record.
AmeriCold Logistics is a leading, national, third-party
provider of integrated temperature-controlled supply chain
solutions. We are headquartered in Atlanta, GA, and have 100
facilities and over 6,500 employees across North America. We
have 545 million cubic feet of temperature-controlled warehouse
capacity and ship 60 billion pounds of freight annually for
over 1,500 active customers.
The 2005 hurricane season was our first assignment with the
Federal Government during a natural disaster. Prior to this
occasion, the only work our company had done for the Federal
Government was under contracts with the Department of
Agriculture for storage of food commodities in our Carthage,
MO, and Bettendorf, IA, warehouses. Our company's first
experience with disaster assistance came in the aftermath of
Hurricane Dennis. In July 2005 FEMA requested that 310
truckloads of ice be disorder in AmeriCold facilities in
Thomasville, GA, Montgomery, AL, and Ft. Worth, TX.
Weeks later and days prior to Hurricane Katrina making
landfall, we are requested by FEMA to manage the loading,
staging and subsequent delivery of these truckloads of ice to
affected regions. AmeriCold was successful in accomplishing
this task with little notice at an extremely condensed time
line. Our ability to redeploy personnel and resources due to
the existing size and scale of our organization, our
warehousing and transportation technology, and our established
contractual relationships with an extensive network of common
carriers were key components of this success. Our success in
our initial activities led FEMA to request additional
warehousing and services for AmeriCold.
Our company's experiences with disaster preparedness
response have led us to develop the following suggestions that
I respectively submit for your consideration. We believe each
of these items will lead to more efficient response at a lower
cost to the Federal Government.
No. 1, the Federal Government must prepare and maintain a
supply chain network plan that identifies private industry
providers and locations necessary for storage and distribution
of relief commodities. A supply chain network plan is an
analysis that identifies the optimal operational locations. The
objective is to locate both manufacturing and distribution
facilities within the nearest proximity of the end market.
In commerce, a successful plan places inventory in
locations that minimize storage and transportation costs, while
also supporting quantity and schedule requirements of the next
receiver. In a disaster response scenario, the objective is to
reduce travel which, unaddressed, consumes time, the scarcest
resource.
Two, the Federal Government must procure and maintain an
inventory of essential commodities, essential for initial
relief aid. AmeriCold recommends contracting in a manner that
provides predisaster funding to officially build inventory at a
lower purchase price, provides for rotation of commodities to
avoid waste and maintains adequate reserve stock. Multiyear
contracts would allow contractors to form alliances of
complementary skills and make investments in assets and people
necessary to efficiently and cost-effectively perform. This
would include relationships with local contractors, which we
effectively used in 2005.
Further, the Federal Government should consider entering
into a triparty agreement with manufacturers and retailers for
water and ice, allowing FEMA to procure and rotate product
through normal retail distribution channels. FEMA's evolving
concept of prestaged commodities to support all hazards
response is a good first step in this direction.
Three, the Federal Government should utilize a single
integrated system to monitor and control the storage and
movement of all commodities at all times. It is essential to
establish and maintain total asset visibility at all times. A
single warehouse inventory management system should identify
the location, manufacturer, date of manufacture, and on-hand
inventory at a minimum. This information is essential for
inventory deployment as well as stock rotation and reverse
logistics.
AmeriCold, for example, uses a Web-based system that
delivers real-time information on customer orders, inventory
and transportation status. We maintain total asset visibility
and accountability whether inventory is located in one of our
warehouses, a third-party warehouse or in a trailer. An
integrated system of this type is essential to support multiple
facilities and carriers, product identification, and rotation.
Four, the Federal Government should develop a virtual fleet
of transportation carriers managed by one party rather than a
single asset-based carrier that faces constraints on peak
demand.
AmeriCold demonstrated the ability in 2005 to obtain
carrier capacity utilizing its precontracted network of over
400 common carriers when supply was scarce to others. AmeriCold
coordinates, routes, dispatches and monitors fleet activities
for over 220,000 temperature controlled truckload in the year.
An integrated transportation and warehouse system, as
previously described, is essential to making this
recommendation successful. AmeriCold has processing systems in
place that can quickly incorporate local carriers into its
fleet and assure they are paid for their services on a timely
basis.
I would be happy to go into further details about my
testimony and suggestions during the question and answer
period. Thank you.
Chairman Tom Davis. Thank you very much.
[The prepared statement of Mr. Schnug follows:]
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Chairman Tom Davis. Mr. Fox.
STATEMENT OF NEAL FOX
Mr. Fox. Chairman Davis, Ranking Member Waxman, members of
the committee, I am Neal Fox, procurement consultant and member
of the board of advisers of FedBid.
It is an honor to testify concerning FedBid's to help the
Federal Government improve disaster-related procurement. FedBid
is a small business that offers online procurement services,
including reverse auctions and other competition methods
through its Web site, FedBid.com.
This Internet-based marketplace enables public sector
buyers to purchase commercial items in a dynamic competition
environment. FedBid operates much like a reverse eBay,
providing an online forum where many sellers bid on Government
requirements, and prices drop as sellers seek to underbid each
other.
It is a user-friendly regulatory compliant means to help
agencies procure commodity products and services.
By automating the procurement process, FedBid significantly
reduces the amount of time required to complete a procurement
transaction, which is especially important during a crisis
where time is of the essence, but controls are still needed.
FedBid ensures a fair competition for all parties, is
compliant with Federal procurement regulations, and keeps the
government buyer in charge of the procurement.
To use FedBid, a buyer posts the requirement at Fedbid.com,
and sets the duration of the competition. Thousands of
potential sellers are notified automatically of the requirement
and could submit multiple bids until a preset time period
expires.
When bidding ends, the government buyer reviews the bids
and decides whether to accept one of them based on best value
and makes the award using government purchase card through
FedBid e-payment capability or a purchase order.
Detailed transaction information provides enhanced
reporting and clear accountability. FedBid has successfully
demonstrated that Federal Government agencies can quickly and
efficiently procure commodities at the lowest available market
prices using their process.
Today, Federal buyers for more than 60 U.S. Federal
contracting offices within 18 Federal agencies use FedBid's
innovative tools. Overall, Federal agency customers have used
FedBid to make over $400 million worth of purchases resulting
in a net average savings of approximately 11 percent better
than government price estimates. FedBid also increases small
business utilization since it brings far more companies into
the competition than most other methods.
Nearly 70 percent of all dollars awarded through FedBid go
to small businesses, and 80 percent of those dollars are non
set-aside awards. With FedBid, both government and small
businesses win.
For crisis procurements, FedBid can provide the government
with an extremely effective first line of defense against no
bid and sole source contracts that put the government at
increased risk. FedBid enables fast yet competitive
procurements. For example, in one competition lasting just 2\1/
2\ hours, over 1,000 sellers were notified, seven sellers bid,
and the government saved over 22 percent. And the awardee was a
small woman-owned firm.
With FedBid, good procurement does not need to suffer due
to urgency.
Buyers can access over 400,000 Federal Government
contractors, and additional vendors can be added to FedBid's
data base easily, usually in about 10 minutes. This allows
State or local authorities to maximize the use of local
vendors. In fact, there are over 1,100 sellers from the gulf
coast States registered on FedBid today.
Federal agencies, under the authority of the Stafford Act
or Local Community Recovery Act, can also use FedBid to reach
local vendors. Although FEMA did not utilize FedBid in the
immediate aftermath of Hurricane Katrina, the agency recently
began a FedBid pilot program.
FedBid has only been used by FEMA at one office for 2
months, yet significant improvements and pricing discounts,
data availability, reporting capability and other benefits have
already been achieved. In this short time, FEMA has used 11
reverse auctions for items totally approximately $400,000 and
average nearly 13 bidders bidding a total of 46 times. Total
savings approached $75,000, nearly 19 percent below independent
government estimates.
We applaud FEMA's action to look for ways to improve their
procurement processes that lead them to use FedBid starting in
March 2006.
FEMA's currently looking into expanding the use of FedBid
to other procurement offices. And we anticipate the opportunity
to replicate our initial success throughout FEMA and be ready
to provide immediate support when the next disaster requires
urgent procurement action. We also appreciate the committee's
efforts on this important matter. And I would be pleased to
entertain any questions from the committee.
Chairman Tom Davis. Thank you very much.
[The prepared statement of Mr. Fox follows:]
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Chairman Tom Davis. Mr. Machado.
STATEMENT OF DAVID MACHADO
Mr. Machado. Mr. Chairman, ladies and gentlemen of the
committee, I would like to thank you for inviting Necaise
Brother Construction Co. to these hearings and allow us this
historic opportunity to testify.
My name is David Machado. I am a staff engineer for Necaise
Brothers. And I will be presenting our company's testimony,
seated next to me is James Necaise, vice-president of Necaise
Brothers.
I would first like to state not only are we speaking out
for Necaise Brothers, but also for all other local Mississippi
contractors that have been slighted by the government's current
practice of hiring out-of-state contractors to perform work
that is critical to the rebuilding of not only the physical,
but the emotional infrastructure of our community.
We have all felt injustice from truck drivers, to chain saw
operators, we have had to scrape and claw to be afforded an
opportunity to rebuild the very place we call home.
In these next 5 minutes, I hope I can convey to you the
frustration we have experienced as a result of the Hurricane
Katrina disaster service procurement process.
Necaise Brothers Construction is a Mississippi corporation
based out of Gulfport, MS. We employ 36 local citizens and work
with local subcontractors to employ hundreds of local
residents.
Necaise Brothers history of disaster relief services dates
back many years before Hurricane Katrina. James's father,
Herman Necaise, president of Necaise Brothers Construction,
began his roots in the field of debris removal back in 1969
with Hurricane Camille.
A resident of Hancock County, MS, Herman used his own dump
truck to haul debris from the devastated Bay Saint Louis, MS
area. On August 29, 2005, Katrina challenged Necaise Brothers
like no other storm had in the past. My family, Herman, James,
as well as many of our employees, all lost their homes through
the ravages of Katrina.
Despite the hardening blow, Necaise Brothers retained every
single employee it had prior to the storm.
We are proud to say that despite our personal losses, our
company was the first responder for numerous municipalities and
local governments across the Mississippi coast in the immediate
hours following Katrina.
Necaise Brothers crews cleared vital roads of debris for
emergency personnel such as search and rescue, fire police, and
power crews to aid those in need.
Once emergency operations were successfully completed,
Necaise Brothers concentrated its effort on debris removal,
reduction and demolition for our local governments. The city of
Long Beach, MS, contracted with Necaise Brothers to remove all
debris from public right of ways as well as demolish and remove
debris for over 600 right of entries citywide and maintain
sites for debris disposal. Necaise Brothers is proud to say
that the city of Long Beach recovery effort is one of the elite
on the coast.
Over 1 million cubic yards of debris have been removed and
disposed of from the city of Long Beach, and our contract is
within 10 percent of the engineer's estimate.
On April 7, 2006, Necaise Brothers was awarded a contract
under a solicitation with the U.S. Corps of Engineers,
Vicksburg, MS, consolidated contracting office for the
demolition of private, commercial, and public structures or
buildings damaged by Hurricane Katrina and removal of related
debris.
AshBritt, a Florida contractor, prevented Necaise Brothers
from performing over $150 million in cleanup work awarded to it
by the Corps by filing a protest with the GAO.
This was not the first administrative challenge that
AshBritt made in an attempt to block the award to contract to
local Mississippi firms.
Prior to the award of Necaise Brothers, AshBritt protested
the procurement claiming that the Stafford Act did not allow
the Corps of Engineers to include a set aside for local
contractors.
The GAO validated the Corps's approach and rejected
AshBritt's challenge. AshBritt's procedural challenge delayed
Necaise Brothers' performance of its contracts by 4 months. All
the while, AshBritt was performing the work intended for
Necaise Brothers.
In addition to the GAO, Congress with broad bipartisan
support has recently encouraged the Corps's attempts to
implement the Stafford Act as it applies to Hurricane Katrina
cleanup contracts in H.R. 4979, the Local Community Recovery
Act of 2006.
The bill provides explicit direction to Federal agencies
that geographic preference for the award of contracts are
specifically encouraged.
The following congressional record clearly reflected
Congress's intent to remove further interference by AshBritt in
the procurement progress. I would like to read comments made by
Congressman Oberstar. Last week, the GAO issued its ruling its
decision in the matter of AshBritt with reference to the file
number dated March 20th, and in the most part, said we think
AshBritt misses the point when it argues that some sort of
preference short of a set-aside also implements the Stafford
Act's preference for using local business to clean up disaster-
related debris. The question here is not whether some lesser
form of preference might have satisfied the act's intent, but
where the preference chosen was an abuse of agency discretion.
Since the language in the statute does not specifically
restrict the application of the preference and since the use of
set-aside is consistent with statutory goal of assisting firms
in effected area, we do not view the Corps' decision to
implement the Stafford Act preference with a set-aside as an
abuse of the agency's discretion to implement the statutory
scheme. That settles it.
The Corps has the authority. That authority has been
affirmed by the Government Accountability Office and the
contracting should proceed. The GAO decision so clear, so
precise, so unequivocal, in my judgment, and in previous
experience with the Corps and with the GAO, should ward off any
lawsuit or further appeal by AshBritt. You think they will be
very wise to accept the judgment of the GAO and allow the
procedure to go forward.
Congressman Oberstar goes on to say, I think it is a good
legislative outcome. It is a good direction to the Corps. It
will be good for the people of Mississippi.
It will be a good lesson for workers and smaller
contractors in other hurricane affected gulf States. It will
set a good precedent for the future.
On April 10, 2006, AshBritt filed yet another protest.
Despite the prior ruling by the GAO and a clear congressional
mandate, the Corps of Engineers refused to lift the automatic
stay, which would have allowed Necaise Brothers to begin its
work.
If AshBritt's second GAO protest was allowed, all remaining
work intended to be completed by Necaise Brothers will now be
finished by AshBritt. Having no other alternative on April 20,
2006, Necaise Brothers filed an application for preliminary
injunction in requesting that a Federal judge intervene to stop
the Corps from allowing AshBritt to complete the work
rightfully awarded to Necaise Brothers.
Immediately after the filing of the application for
preliminary injunction on April 20, 2006, the Corps of
Engineers terminated Necaise Brothers contract, citing delay
caused by protests, thus allowing as separate to continue with
the debris removal process. Not only is this a slap in the face
to Necaise Brothers and local contractors, it prolongs
unnecessary burdens to taxpayers.
If past recovery efforts were examined, they would show
that competitively bidding projects to local companies under
the Stafford Act reduces the cost of debris removal by 25 to
100 percent.
This puts money back into the devastated local economies
and boosts morale as local citizens are allowed to take charge
of their own recovery process.
Meanwhile, back on the Mississippi gulf coast, our office
continues to be inundated with calls from local workers and
contractors, pleading for an opportunity to clean up and
rebuild their community. Unfortunately, at this time, all we
can do is redirect their calls. What is particularly disturbing
about this experience is that the Corps had the tools to allow
Necaise Brothers to perform, to seek a stay which could have
been overriden. But the Corps choose not to do so. Thank you.
Chairman Tom Davis. Thank you very much. I gather you are
not looking for a subcontract right now. But we appreciate your
testimony.
[The prepared statement of Mr. Machado follows:]
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Chairman Tom Davis. I will start with Mr. Pickering.
Mr. Pickering. Mr. Chairman, the testimony illustrates the
difference--Mr. Necaise, you started doing cleanup at the Long
Beach Municipality right after the storm, is that correct?
Mr. Necaise. Mr. Pickering, we started doing cleanup the
day after the storm. My company and other local companies moved
in to clear the roads for Gulfport, Long Beach, and other
cities. We were there right after the storm.
Mr. Pickering. You were not incapacitated?
Mr. Necaise. No, I was not. I lost my house, but I was
there the next day to work.
Mr. Pickering. And your story is repeated across the
disaster area in Mississippi where local communities, even
against advice of the Corps of Engineers, contracted with their
own companies, and from the storm we have county after county,
city after city, local company after local company that weren't
incapacitated.
Mr. Necaise. No.
Mr. Pickering. Mississippians, we are pretty resilient
people, aren't we?
Mr. Necaise. We are.
Mr. Pickering. So this assumption of incapacitation, in
your opinion, would that be a false assumption?
Mr. Necaise. It is a false assumption. And at no time after
the storm did I see first 2 weeks AshBritt, the Corps of
Engineers, anyone. It was a local citizens cleaning up their
own mess, opening the streets, for as Dave mentioned, the
ambulance, recovery efforts. At no time did I see the Corps. I
did not see--I did not experience the Corps or AshBritt until
the night, city of Long Beach, I was signing my contract for
the city of Long Beach debris removal, and that night, the
Corps and Mr. Perkins were giving their presentation to the
city officials on why they should use the Corps.
I was disturbed during this presentation. One of the things
stated that if the city of Long Beach used the Corps, they
would not have to worry about matching funds. If they used the
local contractor, they could be subject to matching 5, 10
percent.
And the other thing was, if they went with the Corps,
instead of locals, they would not have to worry about being
audited by FEMA.
And that, to me, is a scare tactic used to the local
governments, the local officials, to bring the Corps in here. I
have a bid to the city of Pass Christian for debris removal.
You stated earlier, $14 a yard; $12.90 a yard. A million
yards in 35, that is an extra cost in this one small town of
$20 million the taxpayers had to pay. That money could have
been used for something else. It could have been used for
housing. It didn't have to go leave the State of Mississippi.
$20 million on the smallest community in Harrison County.
Wasted.
Mr. Pickering. Mr. Perkins, you said in the Harrisburg
American the moment anyone can shove me out that makes any kind
of financial or common sense, we will stand down.
Now, Mr. Necaise was on the ground the day after the storm.
He cleaned up at half the cost that you did.
Does that make financial or common sense to you?
Mr. Perkins. I think it is first, important for this
committee to understand how this process works.
Mr. Pickering. That is not what--I did not ask you to
educate us on the process. I have learned what the process was.
Mr. Perkins, what I asked was he incapacitated?
Mr. Perkins. Again, I have one way to answer. Would you
like me to answer, sir, or do you want debate it for the next
10 minutes.
Mr. Pickering. Was he incapacitated and were other local
contractors incapacitated?
Mr. Perkins. I will answer it my way if you would like to
hear it. This process works by the local governments of the
State of Mississippi requesting the Governor of their State,
once they have assessed the situation, which they did during
the first 5 to 7 days after Katrina made landfall, demanding
that of their Governor, that this was beyond their ability from
a local level to handle the magnitude of response in the
cleanup that was needed, therefore, triggering FEMA to pass a
Corps of Engineers and bringing in AshBritt under our
competitivey-procured contract that we had for almost 10 years.
And I maintain that it made zero sense to answer your
question to do what the Corps of Engineers was trying to do
when they went to rebid our contract. Absolutely I still
maintain that today.
Mr. Pickering. But when they rebid the contract, that was
December 20th. At that time, at 3 months after the storm, so
even if, let's just say there was some limited incapacitation
or that we needed supplemental help of capacity, why does it
make sense at that point in December for financial reasons, for
congressional intent reasons of the Stafford Act and the
recovery of local economy, why does it make financial sense to
pay twice as much to have out-of-state contractors at a point
when all of our local contractors are on the ground and can do
the work. At that point, sir, why did you continue to protest
and delay and game out the system?
Mr. Perkins. Nobody was gaming the system, sir, regardless
of how you like to characterize it. Speaking specifically to
this bid abstract that Mr. Necaise has, if you examine the
requirements put forth in that specific procurement, it falls
short about two-thirds of the services that were currently
provided for the Corps of Engineers.
So if you are going to sit here and discuss and debate
numbers, you need to compare apples to apples not apples to
freight trains. It is just not the same thing.
Mr. Pickering. What is your comparison of Necaise disposing
of 1 million cubic yards of debris at what 12, 14?
Mr. Necaise. There were 12 bidders on this one particular
project. My company was third. We were third lowest. Out of 12,
nine of the contractors were between $12 and $14 a yard. They
were all local. The job--the description of the job was
removing the debris, maintaining the dump sites. The debris
reduction and that cost come out to $12, $12-and-something
cents a yard. It is no difference, doing what we are doing for
$12.90 what they are getting $36 for.
I mean, you compare apples to apples, and apples to freight
trains, garbage is garbage. You pick it up. You put it in the
dump, you get rid of it. There is no difference here.
I get paid one amount, he gets paid one amount. He gets
paid, to me, it looks like 125 percent more. Federal
Government, our taxpayers are paying this.
Mr. Pickering. Thank you. Mr. Chairman, one final question
for Mr. Perkins.
Mr. Perkins, on your $500 million contract, what is your
profit on that?
Mr. Perkins. The $500 million contract that we have that
the pricing structure of that contract was negotiated with the
contracting department, contracting specialist of the Army
Corps of Engineers. In that process, we are negotiating a
profit margin and a G&A and an overhead number for field
operations etc. We went through the Federal procurement rules
and regulations to establish that price, it was deemed
reasonable, and that is as much as I have to say on that.
Mr. Pickering. Mr. Perkins, on December 6th, you had a
meeting in my office in which you said you had a 25 percent
process on that contract so $500 million contract, was your
profit $100 million?
Chairman Tom Davis. Did you back off 25 percent, is that
about ballpark?
Mr. Perkins. It is a little overstated, but we are so far
away from closing out our books and taking into account all the
various issues that we are dealing with, I will let you in a
few months.
Chairman Tom Davis. Mr. Waxman's time.
Mr. Pickering. Let me just, for the record, make sure that
I understand, you made a 25 percent profit. This is not what is
common sense or the best interest for taxpayer for the country
or for the local communities. Your protest is about your
profit. With that, I yield back, Mr. Chairman.
Mr. Perkins. You are wrong, Congressman. You can
characterize it however you want, I'm sorry, Mr. Chairman, I
was answering his question.
Chairman Tom Davis. I just want to ask why is the contract
and the services you are providing different from what Mr.
Necaise--why are they not apples to apples? What are you doing
differently?
Mr. Perkins. First of all, I know what that proposal or bid
they put out requires. Second of all, we are working for the
Army Corps of Engineers. The administration, the safety, the
project management, the oversight required working for that
agency is significantly greater than working for cities or
counties directly.
Chairman Tom Davis. I'm not after you. I am just trying to
understand what services were you providing different than what
Mr. Necaise has provided?
Mr. Perkins. Part of our contract, quality assurance,
disposal costs, specialized work items, hazardous materials,
asbestos monitoring, mediating pools and subsurfaces voids,
imminent dangers, trees and limbs, etc. They are not even close
in the requirements that were under some of these local bids
that were put out initially after the storm and we are required
to perform under contract. They don't even come close.
Chairman Tom Davis. I just wanted to make sure I got--Mr.
Waxman.
Mr. Waxman. Thank you, Mr. Chairman. One of my biggest
concerns is that gap between what the prime contractors are
being paid and what the people who actually do the work are
being paid. Now the documents for the Army Corps show that for
both debris removal and the blue roof contracts, there are as
many as four layers of contractors between the government and
the worker, each taking a financial cut.
Now, Mr. Perkins, for your debris removal contract, how
many layers of subcontractors does AshBritt employ and how many
layers stand between the government and the workers?
Mr. Perkins. Zero.
Mr. Waxman. So you did the actual work yourself? You did
the subcontracting?
Mr. Perkins. Yes, sir, Mr. Waxman, and I concur I
completely agree with the problems that you see with that.
Those are related to the contracts in Louisiana. Our contracts
in Mississippi, every subcontractor working on the job gets a
check directly from AshBritt. There are very few instances
where some of the local Mississippi companies such as some of
the truckers that are independent----
Mr. Waxman. That is not what I was asking. How many
subcontractors do you hire under your prime contract?
Mr. Perkins. At one point, we had several thousand. But
they were all working directly for us. There was no tiering on
our project.
Mr. Waxman. You had the contract with the Army Corps of
Engineers and then you hired subcontractors to do the work?
Mr. Perkins. That's correct.
Mr. Waxman. And did they have subcontractors?
Mr. Perkins. As I was just getting ready to answer, in very
few cases, we allowed a subcontractor, and there were
Mississippi subcontractors, to hire people underneath them, and
this was mainly at the request of some of the smaller guys who
only had one truck or two trucks or worked for these guys on a
regular basis, and felt comfortable in that situation. But it
is our typical policy as a company we do not allow multiple
tiering at any level.
Mr. Waxman. One document we have shows a prime contractor
and three tiers of subcontractors and press articles have
reported the same. Do you dispute the accuracy of these
reports? Maybe not your company, but for the work that is
generally being done by prime contractors?
Mr. Perkins. I can dispute it for my company because I know
it is statutorily incorrect, but I have personal knowledge that
is the case on some of the other Corps contracts in Louisiana.
It is a common practice which we do not employ. I think it
delays the cleanup. It increases the cost. And it just creates
confusion and takes longer to get the job done.
Mr. Waxman. How much has AshBritt paid for every cubic yard
of debris hauled?
Mr. Perkins. We are paid a combined price of $23 a cubic
yard, not $26 as was mentioned earlier when on the first panel.
Mr. Waxman. The Washington Post reported that local
officials and business people knowledgeable about the contracts
say the companies are paid $28 to $30 a cubic yard. Is that an
inaccurate figure?
Mr. Perkins. I can tell you from my contract with Army
Corps of Engineers, it is inaccurate. I do know in Louisiana
they were paying upwards of 30, 40, 50 percent more than what
we are being paid in Mississippi.
Mr. Waxman. When you get down to the people who have the
trucks and actually doing the hauling, how much do they get
paid per cubic yard?
Mr. Perkins. As I said earlier, we sat down with
contracting. This was not AshBritt just throwing a number at
the wall and hoping they accept the first one we threw out. The
process--we did not have our contract definitized for the first
30 days. We negotiated with the Corps of Engineers contract
specialists, we gathered costs within the first, actually it
was 21 days, we paid on average--there are multiple parts of
this contract. It is not just picking it up. It is picking up.
It is transporting it. Running the temporary debris sites,
hazardous wastes, multiple functions that are captured in this
aggregate rate we get paid. But for simply picking it up and
hauling it from point A to the temporary disposal site, the
average price was in the $10-a-yard range which I might add, 63
percent of the dollars we have spent to date have gone to
Mississippi contractors, so if we pay, on average, more than a
lot of the bids went for in some of the other areas of the
State.
Mr. Waxman. What do you do to earn the extra amount of
money that you otherwise pay to the subcontractors?
Mr. Perkins. We are engaged in this business 365 days a
year. We spend months and months training and planning with the
Army Corps of Engineers. It costs my company upwards of
$800,000 a year to maintain a contract that potentially has
zero dollars, zero revenue against it. We plan. We train. We
manage. We provide project oversight. We assume all the risk
involved. We carry the job of over $100 million before we
received our first penny from the Federal Government. We have
$100 million payment performance bond on this project.
Mr. Waxman. Let me ask you this: Maybe your not the one in
the best position to answer it, because you have an interest in
your company, but what bothers me is that--and conditions were
difficult after Hurricane Katrina hit--but the approach that
the Army Corps uses for these contracts seems to me flawed.
Instead of the government hiring and managing contractors, we
outsource that work to companies like AshBritt. And then they
go out and other companies like yours go out and subcontract,
it seems to me highly inefficient leading to higher overhead
and in many cases worse results.
Let me ask you about the cure notice. You got a cure
notice, it is interesting to me that you got a cure notice
where other companies did not get a cure notice even though the
audit showed they had problems.
Why were you singled out for a cure notice?
Mr. Perkins. I don't necessarily know that we were singled
out, but I can address our cure notice. The Corps of Engineers
through its normal Federal procurement and contracting
practices issued us a cure notice for what they felt were
several deficiencies we had on the project. We addressed them.
We corrected them, and we moved on, and 6 months later, we are
still working.
Mr. Waxman. As I understand, you have been cited again.
They didn't terminate your contract. Did they ever take action
after the subsequent violation of the cure notice?
Mr. Perkins. In a contract of this size and with thousands
of contractors working and the magnitude of work that was
taking place, it is routine to get letters maybe weekly on
certain areas that they would like us to perform in a better
way, if you will. It is normal. It is a normal thing that takes
place.
Mr. Waxman. Let me get clear on one point because my time
has expired.
Mr. Burton. Henry, I would like to get one or two questions
in.
Mr. Waxman. Just a minute. It seems to me you are saying
you are getting $23 and your subs are getting $10. That would
mean your cut is more than half.
Mr. Perkins. That is not correct?
Mr. Waxman. Tell me what the exact figures, are.
Mr. Perkins. I am not going to divulge my profit margin,
first of all, because it is not set. I don't know what that
number is going to be. But part of that cost is picking it up,
part of that cost is hauling to the temporary disposal site
managing the dump site processing it, burning it, separating
it----
Mr. Waxman. Let me ask the chairman if he would get from
you all of the figures, because I think we ought to have the
accurate figures, if it hasn't yet been determined, we ought to
find out where that is and what the determination will be and
what your plans are. I think it is the taxpayers' money and we
ought to have it.
Chairman Tom Davis. Thank you very much. Mr. Burton.
Mr. Burton. I think it is a good idea, Henry, and I concur.
I would like to see all those figures myself.
Mr. Pickering. Would the gentleman yield? Would Mr. Perkins
provide that information to the committee?
Mr. Perkins. What information are you looking for
specifically?
Mr. Pickering. All of your contract information going into
the specific pricing.
Mr. Perkins. I think if you request that information, first
and foremost, from the Corps of Engineers, they have all that
information. They have all the backup, the supporting documents
of how we came to our price, who is being paid what and what
the G&A and profit and overhead numbers should be, and that, by
the way, those numbers are set by the Federal Government. They
are not set by me.
Mr. Pickering. That information is proprietary, and they
would not--the question is, can they release that information?
Mr. Perkins. You have to ask them that.
Mr. Waxman. Would you object?
Mr. Perkins. Would I object to divulging proprietary
information that I have worked hard for 15 years to build a
business, become the best? I would have certain objections to
just giving my competitors nationwide an unfair advantage.
Mr. Waxman. You would have to honor a subpoena.
Mr. Burton. Where did I lose control of my time?
Chairman Tom Davis. Keep going.
Mr. Burton. I think that we--Mr. Chairman, would I suggest
that if it is at all possible to get this information, we
should get this information. I would urge we do that. Let me
just ask you a couple of questions, sir.
This was a competitive bidding process, right?
Mr. Perkins. Yes, sir, it was. It is a prepositioned
contract. It dates back almost 10 years.
Mr. Burton. And you were the low bidder?
Mr. Perkins. We were selected based on our capability, our
expertise and best value of the Federal Government, that is
correct.
Mr. Burton. And you were not the only bidder?
Mr. Perkins. Going back on the prepositions, there was, at
one point, 40 companies nationwide, but on the latest $500
million contract, there were 22 contractors, of which two were
very large businesses from Mississippi.
Mr. Burton. But you were not the only bidder?
Mr. Perkins. Yes. No, we were not.
Mr. Burton. Now as I understand it, after you got the
contract, the Corps started going back on this, under what law
is that?
Mr. Perkins. Stafford Act? Stafford Act.
Mr. Burton. The Stafford Act to try to renegotiate the
contract and that is when you went to court, is that correct?
Mr. Perkins. The Corps put out a solicitation back in
December.
Mr. Burton. But did you go to court?
Mr. Perkins. No, sir we didn't go to court. We exercised
our rights and filed a protest with the GAO.
Mr. Burton. And the GAO responded how?
Mr. Perkins. The GAO, based on what we submitted in our bid
protest, I am sorry in this initial protest on our merits
issued a statutory stay as law allows them to do.
Mr. Burton. And so if the contract went forward, even
though they tried to use the Stafford Act to change it.
Mr. Perkins. That is correct.
Mr. Burton. So you still have the contract right now?
Mr. Perkins. Yes, sir, we do.
Mr. Burton. I don't have any questions other than I would
like to see those figures, Mr. Chairman, if at all possible.
Chairman Tom Davis. Thank you very much. We have 5 minutes
left in the voting. We have a series of votes. So I am going to
suggest we take a recess and come back here in an hour. That
will give us time for the votes. That will give you all time to
get lunch.
Mr. Perkins. Great.
[Recess.]
Mr. Shays [presiding]. Call this hearing to order. I
welcome all our witnesses again. I am sorry for the delay a
bit, appreciate your participation. And at this time, we are
going to go back to 10 minutes a Member, and we will just keep
coming back until we sort this all out. I want to say to our
participants, you will have a chance to make sure your story is
clear, if you have a longer answer, I will give the Member a
little more time. We just want to know the truth whatever the
truth is. And we will get at it.
So with that, Mr. Taylor, do you have a house to live in
yet, or are you still homeless?
Mr. Taylor. My brother has taken me in, Mr. Chairman, thank
goodness for my brother. I understand these gentlemen very
well.
Mr. Chairman, a couple of things I would like to clear up
for the record. Some of the communities in south Mississippi
chose to use the Corps of Engineers. Some did not. And that was
made on a community-by-community basis, and to clear the air
some communities were indeed incapacitated. The city of
Waveland City Hall no longer exists, there was nothing there.
Every vehicle that belonged to Bay Saint Louis and Waveland and
most of the vehicles that belonged to Hancock County either
were destroyed or went underwater. So their options, to this
day, the city of Bay Saint Louis continues to operate out of a
temporary trailer, Hancock County operates out of a temporary
trailer, city of Waveland operates out of a temporary trailer.
So I hope no one in any way would cast aspersions upon
those cities that chose to use the Corps because they lack the
local resources when that decision was made as far as the
cleanup. And I think the communities that could do it
themselves did it themselves and by and large they did very,
very well. So again for clarification.
What I would like to ask the members of this panel is I
think I am seeing a lot of duplication of effort. I think I am
seeing the Corps being paid to do something and to a certain
extent, your company is being paid to do something that the
Corps probably could be doing themselves.
If the Corps had gone out and, for example, given safety
specification, you must pass this safety test, if the Corps had
gone out and said you must be covered by insurance, should
there be an accident in picking up the debris or delivering the
debris so that the people of the United States are not held
liable, what I would like to ask of you all is could the Corps
have done a better job of specking these jobs out, so that it
would not take a large mega corporation in order to bid on it
to where if a guy really did have a truck, he could bid on it,
or if a guy had 10 trucks, he could bid on it.
But what I think I saw was a system that really did cater
to the bigger contractors. And you know, if we are trying to
help devastated people, the last thing I want to do is exclude
a guy who had a truck who is looking for a job.
So I will open it up to the panel.
Because I can tell you from being stopped at gas stations,
the convenience stores, the hardware store, I had a lot of guys
who had a truck, or a front-end loader, who felt like they
didn't get a fair shake in the process. And again, in fairness,
if we are trying to get Mississippi contractors in there, we
ought to start about individuals and work up to companies from
there.
Mr. Perkins. Congressman, I will respond to that. I don't
think it is realistic to expect a small company to be able to
serve and meet the requirements in a prime contractor role with
the magnitude of devastation that Katrina created. I do think
it is fair for this committee, State and local government to
expect that their local contractors are treated fairly and
equitably and given every chance that they can to participate.
And I think we have accomplished that, and I think we have
succeeded our goals 10-fold as far as the Stafford Act
requires.
Could there have been in some of the smaller communities,
some smaller contracts let and some of the more rural counties
to local small business where they could have had a chance to
serve as a prime contract and succeeded? In hindsight, the
answer to that would be yes.
Mr. Taylor. Can I followup on that, and I want to open this
up to all the panel, I presume there were times when you told
your company or your companies, told someone, we can't use you.
If there had to be a prevailing theme in that, what was it that
would have prevented someone from doing work, and if there is
something that needs to be addressed between now and the next
hurricane season, what are those things that need to be
addressed?
So again, so that individual who does own his own front end
loader, does own his own dump truck, lost his house trying to
make a little money to start building his next house, so he
will have a better shot at it next time.
Mr. Perkins. I think when you're going back to the original
$500 million procurement, when you look at the number of the
Mississippi companies who responded to it, I believe it was
two, when you go to the subsequent procurement, which was an 8A
a HUD zone, and unrestricted procurement, there was also only
several Mississippi companies that submitted responses to that
proposal. What this shows me is that, in a fair, open
competitive situation, the ones who felt that they were capable
to serve in that role submitted a proposal. The ones that
didn't, obviously didn't.
I still maintain the fact that we have spent upwards of
$280 million to date with Mississippi companies, of which 70
percent of those are from the impacted area. I don't think
there was a public outcry from Mississippi companies that they
weren't being treated fairly.
Unfortunately, there were a handful of companies that felt
that they should have had our role as the prime contractor, and
I think that is where a lot of these problems originated from.
But to correct it on a go-for-it basis, as a Corps of
Engineers, our contracts expire December 31st of this year,
they are going to reprocure those contracts. I guess, look at
some way that after the event happens, and the initial Corps of
Engineers contractor mobilizes and begins recovery operations
that they immediately begin to identify areas in impacted areas
where they can let out smaller contracts. This was new for
everyone. Katrina was the worst natural disaster to ever hit
the country. The breaches in the levee in New Orleans took a
lot of the focus away from what the Corps of Engineers would
have normally done and the precedent was set, and in my
opinion, I talked to the Corps of Engineers about this is to
look forward and find a way to change that.
Mr. Taylor. Again, the question I am asking you is was
there prevailing reason or a prevailing theme, was there one or
two things that those people who were local, who didn't get
work, could have done work, could have done so that they got
work, and if there is anything that we need to change between
last hurricane season and next hurricane season. Yes, sir.
Mr. Necaise. Let me say one thing, let me back up. The city
of Pass Christian which the Corps and AshBritt were responsible
for. I contacted Mr.--the problem is the small contractor is
excluded from the out-of-state contract, or when out-of-state
contractor is prime.
After this job was bid, this job was bid on a Thursday, I
believe. By Friday, the city of Pass Christian decided to go
with the Corps. I contacted Mr. Perkins myself to see if I
could subcontract from him since I have already bid on the job,
I want one of the cheapest contractors for this particular job
and I was declined. He had enough people to do the job, and
most of his contractors from what I have seen in Pass Christian
were either from the State of Florida or Michigan, and the
problem I see is the small contractors are excluded when a
large contractor from another State is awarded these contracts.
Now, I have no problem with a large contractor being
awarded this contract if he is from that State. He is going to
take care of his own, which is Mississippi contractors.
But I was declined to subcontract.
Mr. Machado. To answer your question about is a small
company capable of meeting the Corps' guidelines and as far as
performing these contracts, we were awarded the contract. So I
think the obvious answer to that question is yes. We are
capable. It is a management operation. It is putting the people
on the ground to pick the trash up. And it is a management
operation.
We were awarded the contract by the Corps on a best value
basis. So the answer to your question, Congressman Taylor, is
yes. The small guys can do it.
Mr. Taylor. Just for my information, was all of your work
done by Necaise Brothers equipment or did you turn around and
hire an individual with a front-end loader or dump truck? How
did that work for your company?
Mr. Smith. Congressman Taylor, let me make sure you
understand what happened in this situation. There was a
preposition contract that AshBritt had been awarded. Necaise
never actually got to perform any work because of the protest
filed by AshBritt both presolicitation, preaward and post award
protests that caused the delays such that Necaise never got to
perform the work.
Mr. Taylor. Did you perform any work in any of the other
cities, Gulfport, Biloxi.
Mr. Necaise. I did. And I used my people that work for me,
my own crews. And I also hired subcontractors from south
Mississippi.
Mr. Taylor. What did that subcontractor have to bring with
him as far as--and this is truly in the form of a question. Did
he have to post his own bond, bring his own insurance?
Mr. Necaise. Insurance, supplied insurance, if an
individual come to me and all he had was a truck, I put him on
with one of my personal crews. If a company comes to me with
their own equipment, I give them their own area to work. They
were responsible for the area. But if there was people just had
a backhoe or front-end loader or excavator or truck, not a true
crew, I would take them and put them with one of my crews and
pay them. I made sure the individual got a chance to work, not
just the subcontractors that had companies that were capable of
doing it, but if an individual had something they wanted put to
work and didn't have enough forces to take on a subcontractor
role, I put them under my wing and kept them with me and paid
them to work with me.
Mr. Taylor. Just for the record, since you did some of this
work, I am going the ask the whole panel the same question.
What--if you choose to answer it, what was your profit margin
on something like that and how do you define profit margin?
Since everybody is defining it slightly different.
Mr. Necaise. Profit margin, it depends, I don't know profit
margin because, we had, like I said, people working directly
under me as one of my crews, I had to pay X dollars per yard
for whatever they brought and other contractors had the whole
package, the trucks, the equipment to load, they got X amount
of dollars, so until we break it all out, I would say our
profit margin was somewhere in the neighborhood 20 percent.
Mr. Taylor. You are speaking for Necaise.
Mr. Necaise. For Necaise.
Mr. Taylor. Mr. Perkins.
Mr. Perkins. I am glad you asked that question because I
want to clarify something that might have been misinterpreted
earlier, when we were talking around the 25 percent number,
that number does not encompass my company's profit. The numbers
that we negotiated we initially went to the Corps of Engineers
with a number right at that for profit and overhead, not just
profit. The number was turned down by the Corps in
negotiations. We subsequently settled on a lesser amount.
So the profit margin or the markup over the definitized
number of what it costs to get the work done included a general
and administrative overhead cost as well as profit.
Mr. Taylor. Do you have anything to say, Mr. Necaise? OK.
Mr. Perkins. If I may, Congress Taylor.
Mr. Fox. If I could add something, sir, I think what you
are trying to get to is to try to figure out a way to get the
local vendors into the maximum extent possible, and that is
what where FedBid, as an online procurement tool comes to play.
I spent 26 years as a government procurement official in
the Department of Defense General Services Administration. Now
I am a private consultant. But the problem in the Federal
Government is there are not enough people to go out and find
these folks, like Mr. Necaise and others, to actually award the
contracts. That is where you need tools. It is like the
difference between trying to dig out a foundation with shovels
or using a front end loader. You need the right tools and you
need a force multiplier like a back end, front-end loader to
get the job done correctly. FedBid provides that type of a tool
that can bring people like Mr. Necaise's company into the
bidding mix whereas in the past the Federal Government has
defaulted to very large contracts that are run by single
companies to take care of the issue. And the profit, that is
where you have tiering of subcontracts. If you use a tool like
FedBid, you can get on the right people at the right levels at
the right time.
Mr. Perkins. Congressman. You asked a question earlier and
I didn't answer it. We did not exclude any Mississippi
companies from working on our project. Although I would say 70
percent of the companies in Mississippi, local Mississippi
companies could not meet the insurance requirements or
workmen's comp laws and Mississippi exempts them if they have
less than 5 employees, those type of things, in the first 30
days, we provided fuel, we supplemented their insurance through
our master umbrella policies, we rented equipment for them
under our national account with the United Rental and our
Caterpillar dealer and things like that.
So we did go above and beyond what we normally would have
done and took on a lot more risks than we would have normally
took on to try to make sure that all the local Mississippi
companies that approached us went to work.
Mr. Shays. Thank you. I am going to claim my time, actually
it is the only member of this committee right now, you know
what I will do, I will just say that this is an extension of
the Katrina hearing, since all of us were involved in the
Katrina hearings.
I am first in awe of what took place in the gulf. The
destruction was beyond my comprehension to see really what
Mississippi was a 10-mile wide tornado 90 miles long, that is
what it looked like. And I am struck by the fact that
Mississippi had less to tear down because it was totally
destroyed.
Mr. Taylor. Mr. Chairman, I would like to remind you that
my insurance company says we had no wind damage. They also said
the same thing to Senator Lott and a few Federal judges, a few
retired admirals policemen, firemen.
Mr. Shays. I understand. And it relates to who pays what on
insurance. Well, I saw it as a tornado. The damage was just
like that. And, I am in awe that we didn't lose more lives and
I appreciate the culture down there that just is in tune to
what you do.
Obviously folks in Mr. Melancon in New Orleans, they were
used to being protected and so they have dealt with something
as horrific of but a different kind of tragedy. The same result
though.
What I am interested in is that I do believe that FEMA is
broken. I believe it is broken in a big way, I think its
contracting process defies imagination. Mr. Perkins when you
respond to questions, I am looking at you and thinking this is
a man who has probably a very successful business and you are
probably quite efficient at your business and, you know, if you
get your profit margin at a certain level, more power to you.
But having said that, we are trying understand, is this
system working right? If I was in a member in anywhere near
this area, and I wasn't seeing local people getting employed--
and not getting employed third hand, but getting employed
upfront, I would be pretty unhappy.
Now if you, Mr. Perkins, can make sure that you can hire a
lot of folks locally and they get paid on time and so on and
they are happy there's logic to that.
I understand there are a lot of people who have done work
down there still haven't gotten paid. And I have a feeling some
of them are the smaller operations.
What I am suspicious about with FEMA and, Mr. Schnug, it
kind of relates in your area and it is not, in any way, a
disrespect to you, but you can help me understand this.
You have a contract with FEMA. Tell me what your contract
is with FEMA.
Mr. Schnug. Basically I really didn't have a contract with
FEMA. We contacted them about--we store ice. We stored ice for
them. We didn't approach them. We didn't go a big rigorous
program. We had a vendor.
Chairman Tom Davis. You weren't a broker where all ice had
to come to before it went out?
Mr. Perkins. No. We were just a place to put it. They
inspected our facility. We have facilities throughout the
south. We have five facilities in Alabama. We have one in West
Point, MS----
Mr. Shays. Did you have to work through a broker?
Mr. Schnug. No.
Mr. Shays. Who do you work through?
Mr. Schnug. We worked directly with FEMA. And they would
direct the ice to us. They had no place to store it.
Mr. Shays. So they weren't creating the ice.
Mr. Schnug. They were buying it from other suppliers
looking for a place. They wanted to inventory ice. They felt
they were going to have a bad year again, they wanted to
inventory ice. We had gone to them actually on a different
idea, which was to have them work with a retailer to buy ice
and rotate it through so that there would always be ice, but
they wouldn't have to own it, it could also go right out to
retail. That was our idea.
Mr. Shays. Are you saying to me that we are actually----
Mr. Schnug. You own ice.
Mr. Shays. We own ice right now and we are storing ice as
we speak.
Mr. Schnug. Yes.
Mr. Shays. And you have a contract to do that?
Mr. Schnug. Yes.
Mr. Shays. Why?
Mr. Schnug. Well, there is a surplus but there is also a
decision by FEMA to be prepared to always have ice around
because ice is not made that quickly. It may seem like it is,
but it takes a large task. I have a retail background so when
there was a shortage of ice right after Katrina.
Mr. Shays. Is ice life or death?
Mr. Schnug. I believe it is. What is represented to me for
people who are trying to store product, live day to day, they
are not buying it to keep drinks cold. They take everything out
of the refrigerator, power is down, how do you keep your own
food stock in good shape? I am led to believe a lot of people
in the south live off the land, so to speak, and it is very
important to keep that product cold. So ice is more of a life
essential than some people think it is because water systems
are down, we also stored ice in. Water is a life essential if
the water system is down. We deliver ice, water and MREs as it
came down. We got into the business basically to store ice in
Thomasville, GA, because they felt that would be the first
responder east or west.
Mr. Shays. My subcommittee of the Government Reform
Committee oversees the Defense Department, State Department,
Homeland Security, and FEMA obviously are part of it. So we are
going to have hearings about how contracts are made.
Mr. Fox, can you speak to anything about FEMA and the
challenge of people having to go through brokers and in order
to be able to do business with FEMA?
Mr. Fox. Yes, that is a difficult problem because of the
way procurement normally works in the Federal Government,
especially when you have a very large procurement operation
with a lot of moving parts. The Federal Government has not kept
pace with technology, unfortunately, when it comes to
procurement operations and contracting.
That is where companies, FedBid, being a private company,
saw a need and stepped in with their own resources at risk to
create a company that can solve a problem the government has.
Mr. Shays. I am not looking at about how you are solving a
problem. I am looking to exploit you. I don't want you to
exploit us right now.
Mr. Fox. I am OK with that.
Mr. Shays. I want you to tell me what you know about the
contracting process. First, does it happen where you only had
to go through one person for housing, one person for water, one
person that people basically had a contract and had a huge
territory to which they had a monopoly?
Mr. Fox. I can't speak in detail about FEMA's precise
contracting operations. But there were not clear lines of
authority of who was responsible for what areas. That much I am
sure of.
The Corps was responsible for some things FEMA was
responsible for some things. Jointly they were supposed to hand
things off, but as handoffs go, in a crisis that is difficult.
I think the key gets back to the preplanning and having the
capability to have these things sorted out. The lines of
authority have to be clearly stated before you ever enter into
this situation. So if people are responsible for certain
procurement areas, they need to know that ahead of the crisis.
So if you are going to divvy up the procurement
responsibilities, that is part of the----
Mr. Shays. One of the challenges is it appears in many
instances people who have had the contract were really brokers
without any resources of any kind. And they were basically
asking a cut in large companies that were willing to pretty
much do things for free or well below cost, and they had to go
through these brokers. And they finally said forget it. Forget
it. So I understand and I will give you a chance a little later
to just emphasize how you think you break through that system.
Where I wrestle, as I listen to this dialog, is Mr.
Perkins, when you get a contract, do you have a monopoly for a
whole area and how large is that area?
Mr. Perkins. There are two ways that a company like
myself----
Mr. Shays. Tell me what happened in real life.
Mr. Perkins. We will procure services. It is very rare and
far and few in between where Corps of Engineers is tasked with
direct Federal assistance to come after a major disaster.
Mr. Shays. I just want an answer. Were you given a certain
territory----
Mr. Perkins. We competitively bid and won the States of
Louisiana and Mississippi and the Alaska region, Pacific
Northwest.
Mr. Shays. And no one else could go through, just you? You
were it?
Mr. Perkins. When the procurement was put out for bid----
Mr. Shays. When you won it. You won the bid.
Mr. Perkins. That is correct, we won the bid.
Mr. Shays. Why we would have limited it to one? Why
wouldn't we have, say, to four or five? Why would we just give
one company such a large bid? Whether you want it or not?
Mr. Perkins. I think it makes perfect sense. It might be a
self-serving statement because we won the contract.
Mr. Shays. But then you are the monopoly. You are the
emperor. You are the only person they can go through. Why not
allow for a huge amount of competition and participation?
Mr. Perkins. You are asking the FEMA and Corps of Engineers
after the worst natural disaster that ever hit this country
where--and I can debate Mr. Necaise on the readiness and
availability of companies in the impacted areas immediately
after the storm, because I don't think it is necessarily the
case. But you cannot select companies that don't plan, don't
train, don't have the resources, don't have the financial
capabilities to take on this task and the volume of work. It is
not possible.
Mr. Shays. I would say it in reverse, given all the volume,
it is crazy from my standpoint to have just one company be in
charge. I don't know why we didn't task literally hundreds. And
it is no disrespect to you.
Mr. Perkins. I don't take it personally. I don't think it
is reasonable to expect the Army Corps of Engineers to manage
100 different contractors in the environment that we were
working in or that Katrina dumped.
Mr. Shays. I don't understand why they just didn't just
give you half of a State or something and give somebody else
another part and somebody else another part. I just don't
understand that.
Mr. Perkins. Like I said earlier, that is a question you
need to evaluate in the future. I don't think the Corps is
going to see a $500 million contract again. And I think that
they realize that things are going to be done different in the
future.
Mr. Shays. And I also say, I think it slows up the process
besides not getting people. I kind of feel like I am an honest
broker, if that dialog and that is what I am getting right now.
Mr. Taylor. Gentleman yield? Mr. Chairman, just
clarification, Corps made the pitch to every municipality and
every county on debris removal. And I was there for one of
them, so I think it is fair to say that Corps let it be known
that their resources, their people, and since it was their
internal, already Government agency, it was kind of implied
that we take all the heat if there is a mistake, no one is
going to be looking over you, the local elected official's
shoulder.
It was also kind of implied for those counties and cities
that chose not to use the Corps, that since we are not going to
be handling this, we will be looking over your shoulder. So,
again, based on the capacity of the city in the case of
Waveland City Hall, Hancock County Courthouse was underwater,
Bay St. Louis was underwater, Pass Christian, half the city is
gone. They all decided this is too big for us to do right now.
We are going to let the Corps do it. Cities like Gulfport
Biloxi that had fairly large organizations, that's remained
intact after the storm, they said, we will do it. That is why
you're going to see a difference from town to town city to
city. That was a local decision as to who was going to handle
it.
Mr. Shays. I hear that part, but what I don't understand is
why the Corps didn't sector it out.
Mr. Necaise.
Mr. Necaise. I believe Hurricane Frederick, the Corps did
separate jobs after Hurricane Frederick, Corps took over
several parts of Alabama, and they bid out each town
separately. There was not a contractor in place to take over
the whole region. If the Corps took over an area, they bid that
area out after they acquired the job from the municipality.
They didn't have someone in place to take over an entire State
or entire region. If they have it, they bid it out, and there
may have been 10 bids, 10 different sections.
Mr. Shays. I hear you. Let me recognize Mr. Melancon.
And the gentleman has 10 minutes. And thank you, for
participating.
Mr. Melancon. Thank you thank you, Mr. Chairman, if you
will indulge me, and I don't know that I have that many
questions as much as I have after listening today and having
sat through Katrina hearings and listening back then, a lot of
the things that occurred and, of course, I am Louisiana, so I
can't speak to Mississippi, but, Mr. Perkins, you said that
AshBritt got to Louisiana, Mississippi and Alabama, contracts,
where did Shaw, as DCC and CH2M Hill, fit into that picture
because they are in Louisiana doing work?
Mr. Perkins. We were the only prepositioned contractor for
under the ACI contracts. We were mobilized to both the States
of Louisiana and Mississippi, immediately after Katrina.
Before----
Mr. Shays. Just define ACI, Advanced Contracts Initiatives,
which covers ice, water, blue roofing and some of the other
power generation and debris removal. But our initial stages of
operation we provided support services, fuel, housing, meals
everything else for Government personnel as well as
subcontractors.
Subsequently after the $500 million bids were let, they
shifted AshBritt out of Louisiana to work in Mississippi stand
alone, and awarded three companies, CH2M and the other company
aren't part of the debris removal, actually Phillips and Jordan
out of Knoxville, TN. The ECC out of somewhere in California,
San Jose area, and Ceres out of Saint Paul, MN.
Mr. Melancon. That is, I guess, where I am starting, Mr.
Chairman. The Corps came in and wanted to, well, the two
parishes that opted to not use the Corps contractor, and I
don't know if there is any collusion in there or not, but I can
tell you that my local elected officials in at least one of
those two parishes got brow beaten and inferred that they were
going to have to pay a cost share if they did not take the
Corps's designated contractor, and this is the Corps and FEMA
in the meetings.
And if I am not mistaken, I might have had a Louisiana
person that handles the OEC operations for Louisiana that was
in those meetings. They occurred on several occasions. And the
parish officials have had some grave concerns about what took
place. But continued, they bidded properly, they accepted the
bid, which was a combination of about three companies that came
together, it is in one parish, it is going to probably be
hundreds of millions of dollars, not counting New Orleans, or
Jefferson or anyplace else, there is enough dollars to go
around for another 20 years. Yet all I saw were companies
trying to squeeze other companies out and people using leverage
to accomplish that.
And I will have to confer with Congressman Baker, but I
believe he was quoted as saying about 3 weeks ago, that out of
the $87 billion that the Congress appropriated before
Christmas, 25 percent was taken off the top by FEMA for
administration costs, $9 billion ended up on the ground in
Louisiana out of that $87 billion, and 75 percent of the damage
was in Louisiana.
I'm not criticizing other States just the fact, the
numbers.
When it all was said and done, we are still probably months
and years away from finishing the entire cleanup, the entire
debris removal, the entire process, and of course we have to go
through demolishing houses and such.
The other problem I have is those contractors, not all of
them but some of those local contractors that did something to
get hired by PC Equipment, three trucks, Louisiana contractor
went to one of the big contractors and got hired and apparently
somebody supervised over those. And I got some that are subbed
to the sub who are still waiting for their money. And in the
case of St. Bernard Parish I have tried to put the entire group
of people, parish officials, government FEMA, the Corps, the
State OEC and everybody in one room and FEMA refuses to attend.
I have yet to find out who the person is that makes the
decisions in Louisiana on whether someone gets paid, or should
I say allocated money, because all I have gotten when I have
asked for that information is two or three bureaucrats who say
bring me a stack of papers that are computer printouts of the
PWs and said, here, go through it.
One of the parishes that chose to have its own contractor
and allocate the Corps contractor for other portions have had
problems also and became territorial when the parish's
contractor crossed a street to demolish two homes or pick up
trash from two homes because the people asked them if they
would do it and the Corps people came down there and told them
they cannot do that. These contractors that have been hired by
the parishes directly did not take the Corps people, believe
that their people are doing the work cheaper and visibly are
doing the work faster than are the Corps contractors, while at
the same time these contractors are having to spend day in day
out 7 days a week trying to protect the contract they got
because people are trying to void it, tell them that the parish
is going to have to pay 10 percent. And God knows none of our
parishes have any of that money to do anything.
We in this Katrina committee asked the Corps of Engineers
and the FEMA people sitting right at that table what the costs
of debris removal, what the cost of cleanup that they were
paying for the contract. We were told by a member of the Corps
we would have to go back and see who it was, that they would
get us that information. We have followed up the Katrina
committee and we have still not gotten that information. One of
my parish presidents asked for that information from the Corps
and FEMA and never received it and this goes back to last
October. He then wrote a letter on the freedom of information
asking for that information and never received it. And I
convinced him about 2 months ago to file a Federal suit that
will be heard in June in New Orleans as to what the actual cost
of cleanup is.
These parishes wanted to do a good job, get their people
back up, get their communities back up, resurrect or whatever
term you want to call it, and it has been a hindrance all along
because of them, not all of them but the major contractors and
this, you have to task the Corps contractors or you are going
to have problems.
One parish that went back and hired their own people wanted
to know what number did they have to look for so that they will
know whether they were getting a good price or not. And that is
when the game started of we cannot give you that and that is
where we are now waiting for June to get here so we can get a
hearing in court. That same parish had its own landfills and
its contractor was hauling to its landfills. Coincidentally
their landfill got shut down last month by EPA. But the
landfill that is 30 miles away still continues to receive the
debris from this parish and the contractor that was doing this
work that was using the parish's pits have basically been
stopped from continuing their work.
Trailers, I have a contractor that was putting trailers
down in one parish. He was getting paid by the unit completion.
The major contractor was getting paid cost plus and his
experience was that they were very nitpicking and they spent a
lot of time going back. If they said stake the drain pipes at 4
feet and it went 4 feet one-quater inch they made them rip them
up and start all over again. I do not know if that got
straightened out, and when the guy said something they
threatened to cancel his contract.
I can go on, Mr. Chairman, but I think that we would need
to get the Corps in here, Colonel Vesay, and because of the
unwillingness and FEMA, and for that matter I am willing to
bring the Louisiana people in here because we need to know is
there something actually going on out there.
Mr. Shays. Let me say to the gentleman, if the chairman
wants my subcommittee to do it or if he wants the full
committee to do it, I think there are a number of followup
hearings that we can have that will get specifically to these
points and we will make sure that folks come in who are able to
answer our questions. So I think what we are trying to do is
answer more questions than we can answer here.
Let me make this point to you that you would be invited to
participate as a full member with Mr. Taylor as well as Mr.
Pickering.
Mr. Melancon. I acknowledge and I appreciate being allowed
to do that, and I would leave the decision on subcommittee or
full committee up to you and Chairman Davis. I just--I am to a
point, Mr. Chairman, that asking them to come here and pledge
that they are going to tell the whole truth and nothing but the
truth, I think that the scare of subpoenas of coming here and
then having to swear carries a whole lot more water and we
might get more information. We just have to figure out as a
committee or your subcommittee what information we would ask
for, but I would ask that be done.
Mr. Shays. I would think we could meet that need and I
think that would be very constructive. Let me ask Mr.
Pickering, my Staff Director is in the corner wondering what
have I committed to but we need to take a good look at FEMA and
this process in general.
Mr. Pickering.
Mr. Pickering. Thank you, Mr. Chairman. I just want to
comment on some of the discussion for Mr. Taylor. What we are
looking at was several different models. Mr. Necaise looked at
the model where the Corps contracted in Hugo and that was one
model. Usually in natural disasters it is done by local
entities. If you look at the Florida model which has been held
up as probably the most efficient, they have a State wildlife
emergency plan in place which includes pre-storm contracts for
debris removal. So if a city like Waveland is wiped out and
does not have the capacity, you have the contract in place, but
you also have the State compliance assistance to help comply
with any requirements to meet all FEMA standards as they
achieve that. There is a public policy objective here.
Now, Mr. Perkins, would advocate that there should be and I
do not say this in the pejorative, there should be a storm
chasing industry and that is that you pay a premium to have
somebody with a capacity that can be mobilized to meet any
storm at any time. That premium is built into his price and
into his profit. And in a second I will give you a chance, Mr.
Perkins, if you disagree with that.
But one of the reasons you have a higher price than the
Corps and through a national company like AshBritt is they
would argue that they have to have the resources, they have to
store them, and there are a lot of downtimes where they are not
in use, unlike Mr. Necaise, who is not only there for debris
removal but he is doing local projects, construction work all
the time.
It is clear from the first panel, General Riley did not
disagree and the Inspector General did not disagree with the
$31 per cubic yard. Mr. Perkins has said it is $23 and then if
you add five it is $28, so somewhere between $28 and $31 for
cubic yardage cost of the national Corps model in Katrina. Now
we are all entitled to our opinions but we are not all entitled
to our facts.
So what I would like to do, Mr. Chairman, is ask that we
have a full transparency of what the facts are, and I believe
the only way we can do that is to ask the Corps and Mr. Perkins
and other major contracts to go ahead and lay on the table for
us their books, to give us what the cost was in Katrina so that
we will know which model is most cost effective, the Florida
model, which is a State-local model or the national Corps
model. I think that what we will find is that no one disputed
the average cost of debris in the local communities in
Mississippi.
Mr. Chairman, AshBritt did 21 million cubic yards of debris
removal. Local counties and local contractors did 21 million
cubic yards in Mississippi. This is going to be a very
equivalent comparison of what is the most cost effective way
for us to do this for the taxpayer.
Now from a macro question, do we want a storm chasing
industry and pay that premium or is our job objective to
recover local economies? And what Congress has said not only in
the Stafford Act but what it just said unanimously in the House
in the legislation that was passed and what it said unanimously
in the Senate is that local recovery is our highest policy
priority.
Now the Corps tried to carry that out and, Mr. Perkins, I
do not fault you for playing by the rules and winning the
contract in 2001, building a company up successfully over a
number of different hurricanes and disasters. But what I do
have a problem with is that when the Corps of Engineers tried
to meet their Stafford Act requirements and to help the local
economy by having a geographic set-aside for Mississippi
companies that was protested.
Now, the GAO rejected your first protest on the geographic
set-aside, and I want the committee to understand they rejected
that. Then when the award was given to Mr. Necaise, you
protested the award of that and they did not say that was the
preferred outcome. They said that the only way to finish the
job and the fact that they expect to finish by the end of May
and the protest would last to 100 days, that they had no other
choice but to withdraw the contract from Necaise that they had
won. They had met all the criteria. They had been in the area.
They were performing in the highest standard and the best value
of those contracts.
Now on a going forward basis, Mr. Chairman, I hope that the
model, and as I see some in the audience from the Corps of
Engineers, we can go to the Florida model, which is a complete
State local. Or we can go to a Corps model where you continue
what you did in Mississippi in doing geographic set-asides for
pre-storm local-State contracts on a competitive basis. And I
have always advocated even if it is a geographic preference
that it should be done competitively. And I think that the
evidence is very clear that the Mississippi companies and the
competitive, even when it was limited, were a lower cost.
Mr. Necaise, it was my understanding in your bid to do the
work that you had a lower cost of what you were offering to do
the work for in your contract. Is that correct?
Mr. Necaise. That is correct.
Mr. Pickering. So again the lowest cost and local is
precluded and denied because of protests from an out of State
company.
Now the other question, Mr. Perkins, you had two options.
You could have protested the geographic set-aside and you could
have protested the award of the contract or you could have
partnered with the Corps and with Mississippi companies in a
transition. Is that correct?
Mr. Perkins. I do not understand your question. What
exactly are you asking?
Mr. Pickering. If they made a decision to transition the
prime from AshBritt to Necaise or any other Mississippi
company, you could have with your resources continued to
partner in a way that there would have been no disruptions to
the work, the schedule and the cleanup; is that correct?
Mr. Perkins. Had the Corps been able to award the contract
to Necaise then we would have assisted with the transition.
Mr. Pickering. But you were the reason they could not award
by your protest.
Mr. Perkins. If following Federal procurement rules and
regulations and due process and my rights as an American
citizen and businessman prevented that, then I guess I am
guilty. Remember the bill that you sponsored part of that
language tried to take the judicial appeal rights away from
AshBritt and any other contractor in the country. And luckily
there were some congressional members that realized how
damaging that would be and pulled that from the bill. So as we
sit here today I still have the rights of an American citizen.
Mr. Pickering. Mr. Perkins, you do have those rights to
protest and litigate and you also refused to come to this
committee, did you not, voluntarily?
Mr. Perkins. You subpoenaed me, that is correct.
Mr. Pickering. Is there a reason you would not come after
winning $500 million and making tens of millions of dollars of
profit from taxpayer dollars that you would not come before a
congressional committee to give testimony when asked?
Mr. Perkins. Specifically as to you, Congressman Pickering,
I do not have a problem being here. I am here. Obviously I was
subpoenaed so I didn't have a choice. I do not have a problem
with the question asked, is FEMA broke? No, FEMA is cracked.
It's not broke. It can be fixed. These problems that we are
talking about here today go back, it is not a party issue. It's
been going on the last 10 years. They happen. The committees
get together. Everybody talks about it. Are there any changes
in the last 10 years? There hasn't been any changes.
The problem here is I've been criticized for not hiring
Mississippi companies is wrong. It's false. We spent hundreds
of millions of dollars hiring Mississippi companies. We've
created over 500 very high paying jobs in administrative,
clerical, project management. The problem here, Congressman
Pickering, is I didn't hire the right Mississippi companies. I
didn't hire the four or five Mississippi companies who employed
their lobbyists to badger me on a day-to-day basis, who
employed your office to call me along with some other
delegation members from your State to call me and demand that I
do things that I'm not going to do. It's my contract. I'll
administer it however I felt was best for my company in the
recovery mission of the State of Mississippi.
So this isn't about Mississippi companies. This is about a
select handful of companies who wanted my contract and didn't
get it. That's what this is about.
Mr. Pickering. Mr. Perkins, if you would like I can have
the Corps of Engineers release all information, any
communication, any contact my office has ever had with them and
they will clearly show that I never advocated for one single
company. I have advocated for Mississippi companies and the
GAO----
Mr. Perkins. That is not true, sir.
Mr. Pickering. It is very true.
Mr. Perkins. I'm just telling you it's not true.
Mr. Pickering. It is extremely true.
Mr. Shays. Will both gentleman suspend? I felt that this
has been an aggressive and informative hearing. I felt that the
Member of Congress allowed you to make a very long statement of
which you are pointing a real strong finger and I would like
him to be able to make his comments.
Mr. Perkins. OK. I'm sorry.
Mr. Shays. That is all right. I realize you are a little
bit under the gun. I think you have done a fine job. I think
you all have. We will get to the bottom of this. You have the
floor, Mr. Pickering.
Mr. Pickering. Mr. Chairman, it is clear I have advocated
for Mississippi companies, no specific. I have advocated for a
competitive process. I have advocated for a form of the
Stafford Act so we will have local geographic priority given.
It is with the broad mission and objective of recovering local
economies.
Again, 100 percent of the House and 100 percent of the
Senate agree with that position and that policy. We have
clarified the Stafford Act so that the Corps of Engineers could
fight off protests that you filed so that geographic set-asides
could go into effect.
As we go into the next season we will need to do additional
reform to make sure that the congressional intent, the Stafford
Act objectives give preference to the recovery of local
economies and that we move away from the most costly and
inefficient models of recovery, and that is my sole objective
here.
Now, Mr. Perkins, did you have any conversations with your
subcontractors concerning whether they should file protests as
well?
Mr. Perkins. Did I have any conversations with my
subcontractors? There were three protests filed on this latest
protest of award, ourselves, D and J, and Hempill/Uteah joint
venture out of Mississippi. We talked about the protest
procedures. They asked me because of my experience in the
Federal contracting process how it works, what they need to do,
etc. I gave them some advice.
Mr. Pickering. Did you encourage them to do so?
Mr. Perkins. Absolutely not to answer your question.
Mr. Pickering. That is fine. Thank you, Mr. Perkins.
Mr. Perkins. I have 3 minutes of a couple of things I would
like to address if that's OK.
Mr. Shays. Let me say this. I unfortunately have a need to
make an airplane or I am stuck here for a while. I would like
Mr. Taylor to make a point. I would like each of you to just
have a minute or two to just summarize any point you want to
make. And Mr. Perkins, this isn't your first time here,
correct? I think you've been here before.
Mr. Perkins. No, it's my first time. I'll come voluntarily
next time.
Mr. Shays. I know you will. There are people I know who say
you are a fine gentleman and I think all of you have conducted
yourself well, and I think everybody here has a point to make
that is valid and it comes a little bit in conflict, frankly.
Mr. Taylor.
Mr. Taylor. Thank you, Mr. Chairman. Seated in the back of
the room is Colonel, and I hope say it properly, Vesay of the
Corps of Engineers, who has actually handled this contract on a
day-to-day basis in south Mississippi. It has been a tough task
and they have moved millions of cubic yards of material. And at
this point things are looking a heck of a lot better than when
they started and they deserve credit for that.
I think everyone is concerned that we spent too much money.
That is universal and we want to do better next time. I think
there are a heck of a lot of south Mississippians of limited
means who wish they had had a better shot of participating on
these contracts. That is also fair to say. So with that in
mind, Colonel, we are going to ask you to appear before this
committee. I am not a member of the committee, the chairman has
agreed to do so. We are going to ask you to appear before the
committee and give us your recommendations of how do we reach
those goals. And I sure as heck don't wish a hurricane on
anyone, but the Navy is saying that we're in for 10 years of
this and I am taking their word for it. So when the next storm
hits how do we do a better job of giving the local average Joe
a shot at it? How do we do a better job of through this
competition getting the cost per cubic yard down for the
taxpayer? And I would really, you are a smart guy, I would ask
you to give us your personal thoughts as someone who has
witnessed what has happened because I value your opinion. And I
think all of us want to see us do a better job as a Nation next
time.
So we are giving you some notice and some time to think
about it. I very much welcome the chairman's willingness to
have you back, and I very much welcome your willingness to come
back and speak to us.
Mr. Shays. I thank the gentleman. Is there any comment? Let
me start from my right going this way. Any comment that you
wish that you had an opportunity to make a point of? From Mr.
Necaise over. Is there any point that you wish to make that
needs to be made before I adjourn this hearing.
Mr. Necaise. I'll let Mr. Machado answer that.
Mr. Machado. The biggest deficiencies that we see with the
Corps is just there are inefficiencies in order to perform the
work. As we stated earlier, we performed all the debris cleanup
for the city of Long Beach and I think it was in February we
made the last pass to clean up debris there. And as many other
cities, Gulfport, Biloxi, there are numerous others that are
already done. The Corps is the last one. They are the last one.
There is just so many different things that slow down their
progress. It is just unfortunate because it just affects the
citizens there. And all the way around, it is the slowest. It
is the most expensive. There's just numerous problems with it.
So the biggest thing I think was touch on----
Mr. Shays. Mr. Machado, that will be touched on. Mr. Fox. I
don't mean to say we will take a look at it, we are going to
take a look at it because we get it.
Mr. Fox.
Mr. Fox. I listened as a lot of good points were made
during this hearing on keeping competition in the mix at all
times, about ensuring local vendors are brought into this
procurement process and kept in the procurement process as
early as possible as well to avoid the need for large
prepositioned contracts. That is all what FedBid can offer in
the way of reform, a transformational process that is now
available to Federal Government contracting. FEMA has reached
out to FedBid seeing that and I applaud FEMA doing that. The
young blood you saw here from FEMA and DHS, the people who
unfortunately had to take the heat, they are the next
generation and they are looking for new processes and they see
FedBid as one of those new processes.
Mr. Shays. The bottom line message is that things are
pretty archaic and need to be updated.
Mr. Fox. That's true. In 26 years I spent on the Federal
procurement process not a lot changed unfortunately. We have
new processes, we have new capabilities that companies like
FedBid have to offer.
Mr. Shays. Mr. Schnug, any comment?
Mr. Schnug. I have basically two comments that we are here
for. No. 1, we didn't have a contract. We basically treated
this like it was walk in off the street business would do with
any of our warehouses. Our point that we're trying to make is
that what made us unique was the fact that we could give the
government total asset visibility so if it was at one of our
warehouses or someone else's warehouse, we actually used a
couple of other warehouses that were not ours to store the
material. But that's something you got to have. You have to
have some way of knowing I've got a pile of ice here, it's got
to go here. That was our point of we're just general business
guys.
We also did the same thing with transportation. We used 200
different transportation carriers. Anybody who qualified with
us, DOT license, secure, insured, etc., we were basically
putting requests for transportation out on a bid board. You do
that at a very low margin business. Load A has to go from this
facility to that facility. And those were another thing that we
brought to the committee was you can generally do these things,
things that go on in daily commerce every day. We do 220,000
dispatches a year. We don't have a fleet. We use all different
type of carriers. ConAgra, for example, stores with us in 40
different locations, always knows where the materials are. So
that was what we had brought to the committee was the concept
that you don't need a long term contract. You don't need major
funding for supersystems. Those systems and supply chain
management exist today and that is our speciality. Thank you.
Mr. Shays. Thank you very much. Mr. Perkins.
Mr. Perkins. A couple of things. Congress Pickering had
noted the Florida model. And he's right on that. We hold more
preposition contracts in the State of Florida than any other
company in the State of Florida. It works. It also works
because the State of Florida, the local governments, have much
more money for planning and training. Those are some of the
things that need to be looked at. States like Mississippi, they
don't have the tax base, the tourism base. If you don't give
them the money to preplan you cannot expect them to be prepared
to evacuate and handle their own--especially with situations
like Katrina. Their problems are much broader and you can't
figure them out sitting here at a table.
As far as, 30 seconds, the Mississippi Department of
Transportation put out bids that went 100 percent to
Mississippi DOT contractors. Those prices in a competitive bid
situation were two and a half to three times higher than the
rate the Corps of Engineers paid us for almost identical
services. Also, 85 percent of the work performed by those six
big MDOT contractors went to companies from out of State. Fact.
Mr. Shays. You get me concerned that you may get people
wanting to jump in, and I do have to get a plane. How about
more general comments? Your point about Florida, any other
comment that you would like to make?
Mr. Perkins. I just want to set the record straight on one
thing and the question that Congressman Pickering asked me
about his perceived--I need to set it straight because I need
to finish it.
Mr. Shays. Then I'm going to allow Mr. Pickering to
respond. So if you want to speak in general terms you may.
Mr. Perkins. I will speak in direct terms because I have
to. The question was asked to me, did I influence or try to
strong arm any other contractors into protesting. The
contractor he is referring to is Hempill/Uteah. They were a
partner of ours. They continue to be a partner of ours on the
job. We sat down as partners because we're working together to
talk about strategy and why we should continue to work and what
we could do about it. Ultimately, they had a debriefing of the
U.S. Army Corps of Engineers and felt that they should have
been awarded the contract and their decision to protest was
solely based on that debriefing.
Mr. Shays. My final word is I would understand if you won a
contract why you would want to keep it and I could understand
if I was a Member of Congress why I would want the people I
know the best and most to have it. Both sides are very
explainable to me.
I appreciate all of you being here. The pledge that we're
making at this hearing is either the full committee will do it
or my subcommittee or a combination of both, but we're going to
get into more details. We will have some panelists who will be
very keen on those particular issues.
We thank you for being here. We know a lot is at stake and
appreciate your patience. Thank you very much.
Mr. Pickering. Mr. Chairman, I want to thank the committee
for letting me participate and I want to thank all the members
who have worked with us from the select committee. I hope that
we can find the reforms. I never said ``strong arm influence.''
I said did you encourage, and your testimony was absolutely
not. Is that still your testimony?
Mr. Perkins. I think I corrected it. Strong arming, storm
chaser----
Mr. Shays. The bottom line is when you look at it from the
outside I think we know where both of you are coming from. We
totally understand it honestly. With that I would say the
record remains open for 7 days and we will get to the bottom of
this, and God bless America. This hearing is adjourned.
[Whereupon, at 3:55 p.m., the committee was adjourned.]
[The prepared statements of Hon. Dennis J. Kucinich and
Hon. Charles W. Dent and additional information submitted for
the hearing record follow:]
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